GERMANY Law and Practice Contributed by: Marc Löbbe, Michaela Balke, Oliver Schröder and Martin Kolbinger, SZA Schilling, Zutt & Anschütz
from agreeing to exclusivity, except in exceptional cir - cumstances, due to the applicability of the corporate benefit test. Recently, target management has also started to initiate auction processes for the company when approached by a potential purchaser (a practice common in the USA). 5.5 Definitive Agreements In a private M&A context, definitive agreements can vary widely depending on the transaction structure, while certain market standards for “typical” share pur - chase agreements are firmly established. For public bids, the German Takeover Act, supple - mented by the German Takeover Act Offer Ordinance, governs the legal requirements (see 2. Overview of Regulatory Field ). Both regulations mandate that the offer document be significantly detailed in order to provide target company shareholders with sufficient information on which to base their decision to accept or reject the offer. The offer document must contain information on, inter alia: • the consideration; • the offer period; • the possible effects of a successful offer; and • the bidder’s intentions with regard to the target company. The offer document also determines the subsequent content of the share purchase agreement and con - tains its terms and conditions. To support the share - holders in their “take it or leave it situation”, both the management board and the supervisory board of the target company are obliged to give a reasoned opinion on the assessment of the offer. Joint Ventures The legal documentation for a joint venture usually consists of a business combination agreement cover - ing the transaction aspect of the joint venture, and a shareholder agreement covering the co-operation side of the deal. Both components may be kept separate or combined in one document. The business combina - tion agreement focuses on the establishment of the joint venture. Its content depends on the deal struc - ture and may vary from a share purchase agreement to an investment agreement setting out the entrance
of the buyer into an existing legal entity or the estab - lishment of a new legal entity by the joint venture part - ners, including the transfer of existing businesses to such entity. In the shareholder agreement, the joint venture part - ners usually agree on the corporate governance and financing structure of the joint venture entity, restric - tions on the transferability of the shares and further covenants, such as non-compete obligations, as well as anticipated exit scenarios. The corporate govern - ance is usually determined by way of pre-agreed arti - cles of association for the joint venture entity as well as pre-agreed by-laws for its management, including lists of reserved matters, super majorities, quorums, minority shareholder protection and anti-dilution. For a future exit, the joint venture partners frequent - ly agree on pre-emption rights and, depending on the specific situation, on tag-along, drag-along, call option or put option rights, exit waterfalls or even a (rather vague) framework for a potential future IPO. 6. Structuring 6.1 Length of Process for Acquisition/Sale The duration of a takeover process cannot be gener - alised and differs between private and public transac - tions. In private M&A transactions, the duration varies wide - ly. In small transactions, the whole process can be completed in a matter of weeks. In large and more complex transactions, it can take months or, in some cases, years (considering the whole time from the planning stage to the closing of the transaction). Public M&A transactions typically take around three months from the bidder’s announcement of the inten - tion to issue an offer to completion (the maximum is 22 weeks; longer durations are possible if compet - ing offers are published). The duration of preparatory actions, particularly stakebuilding and due diligence, are not included and can vary widely.
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