GERMANY Law and Practice Contributed by: Marc Löbbe, Michaela Balke, Oliver Schröder and Martin Kolbinger, SZA Schilling, Zutt & Anschütz
tions are met (see 5.1 Requirement to Disclose a Deal ). In this context, the disclosure of the transac - tion can no longer be delayed if there are already suf - ficiently accurate rumours about the transaction in the market, in which case the issuer must disclose the inside information to the public as soon as possible. 5.3 Scope of Due Diligence The target company’s management is generally per - mitted to disclose company information to a potential acquirer only if doing so aligns with the company’s best interests; this determination must be assessed on a case-by-case basis. Nonetheless, both public (except hostile) and private transactions commonly involve purchaser due diligence, the scope of which largely depends on the specific circumstances of the transaction. In most cases, the potential purchasers will conduct financial, legal, tax, operational and compliance/ESG due diligence. Transactions in technical industrial fields often require technical and environmental due diligence. Macroeconomic and supply chain consid - erations are an important aspect of due diligence. 5.4 Standstills or Exclusivity By concluding a standstill agreement, the bidder commits not to further increase its stake in the tar - get company. Therefore, the target company some - times demands standstill agreements as a means of defence. Although standstill agreements are generally permitted under German law, they are rare in Ger - many. In addition, in a public offer for control, a bidder must extend its bid to all shares of the target com - pany, preventing a standstill agreement. An exclusivity agreement, in contrast, obliges the sell - er of the target company not to negotiate or sign with other potential buyers (for a limited period). It is not uncommon for a buyer to demand such an agreement at some advanced stage of a transaction to justify further investments in the course of preparing for the transaction. Exclusivity agreements are generally permitted under German law and may be concluded with key share - holders in particular. However, in a public M&A con - text, the target company itself will usually be precluded
• if it were made public, it would be likely to have a significant effect on the price of those financial instruments or on the price of related derivative
financial instruments. Protracted Processes
In a protracted process that occurs in stages (eg, in the case of an M&A transaction), it is recognised that the final steps (signing/closing) may trigger the obliga - tion to make an ad hoc announcement, but also that this may already be the case for significant intermedi - ate steps. The MAR allows for exceptions, however. • “Self-exemption” – an issuer may, at their own risk, delay the disclosure of inside information if: (a) immediate disclosure is likely to prejudice the legitimate interests of the issuer; (b) delay of disclosure is not likely to mislead the public; and (c) the issuer is able to ensure the confidentiality of that information. • “Market sounding” – an issuer may disclose pos - sible inside information to potential investors to determine the interest of potential investors in a possible transaction. The legal requirements for these exceptions to grant relief are quite complex, so it is recommended, and common practice, to take legal advice prior to any delay of disclosure. If the target company and/or bidder is not listed on an organised market, it has no obligation to publicly disclose the transaction or the related intermediate steps (see 2.5 Labour Law Regulations ). 5.2 Market Practice on Timing Although all parties involved – the target company, the bidder and the seller – are usually interested in avoid - ing early disclosure, it is not possible to defer from legal requirements. However, the parties may attempt to structure the transaction in a way that allows for a delay of disclosure. With regard to listed companies, the issuer can delay the disclosure of inside information if certain condi -
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