GERMANY Law and Practice Contributed by: Georg Linde and Kamyar Abrar, Willkie Farr & Gallagher LLP
due diligence on supply chains, data governance, and labour practices. Many funds have embedded ESG KPIs into shareholder agreements and portfolio moni - toring. Anti-bribery enforcement remains aligned with OECD and EU standards, but enforcement risks are rising for companies operating in high-risk jurisdic - tions.
may introduce specific co-determination rights post- transaction. In 2025, AI-based legal tech tools are increasingly used to automate document review, track versions, and flag standard clauses – particularly useful in high- volume, time-sensitive auction processes. 4.2 Vendor Due Diligence Vendor due diligence remains common in competi - tive auction sales. Rather than providing a full legal due diligence report in the traditional sense, sellers often offer a legal fact book: a concise summary of key corporate and legal facts, prepared without legal opin - ions. It allows for identifying and addressing potential - ly deal-critical issues early, helping to streamline and smooth the legal and commercial negotiation process. These legal fact books are generally made available on a non-reliance basis, meaning prospective buyers must sign a release or waiver letter in favour of the sell-side legal advisers before being granted access. Even where a vendor due diligence report or legal fact book is provided, buyers will typically conduct sup - plementary buy-side (or “top-up”) legal due diligence to verify key findings and ensure alignment with their internal risk thresholds. In Germany, private equity funds typically execute acquisitions through privately negotiated share pur - chase agreements, primarily aiming to acquire major - ity or full ownership stakes in the target company. This approach, predominantly structured as a “share deal,” is the most common method and allows for flexibil - ity in tailoring transaction terms directly between the buyer and seller. While public tender offers can occur for publicly listed targets, they are relatively rare in the context of private equity. Asset deals, where specific assets and liabilities are acquired instead of shares, are less frequent due to their higher administrative complexity (eg, consent requirements, employee transfers). They are generally reserved for special sit - uations such as corporate carve-outs or distressed M&A scenarios, where a share deal may not be fea - sible or desirable. 5. Structure of Transactions 5.1 Structure of the Acquisition
4. Due Diligence 4.1 General Information
Legal due diligence in German private equity trans - actions follows a comprehensive and risk-focused issue-spotting approach. Most deals rely on a struc - tured virtual data room (VDR), with findings delivered through focused red-flag reports, tailored to the deal’s complexity and sector exposure. This report typically also provides the client with recommendations on how to mitigate the risks arising from the transaction and, where possible, comments on the commercial impli - cations of these risks. Beyond deal-specific commercial matters, due dili - gence routinely targets key legal areas such as corpo - rate law, commercial contracts, finance, employment, IP, IT and data protection, real estate, compliance, insurance, litigation and regulatory matters. In par - ticular, German FDI screening and merger control thresholds are reviewed early, especially in sectors like healthcare, defence, AI, and digital infrastructure. ESG-related legal due diligence has become a stand - ard component, driven by the CSRD, CSDDD, and Germany’s Supply Chain Act. Legal teams assess not only the existence of ESG policies but also their operational implementation and legal robustness, especially for international targets. Another critical focus is data governance and IP own - ership. Private equity investors in AI-, software-, and tech-heavy targets pay close attention to the prov - enance of training data, open-source software usage, and compliance with GDPR in light of the upcoming EU AI Act. Algorithm transparency, model explain - ability, and liability allocation are emerging as head - line issues. Employment law diligence addresses key personnel contracts, incentive schemes, and the presence of works councils ( Betriebsräte ), which
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