GERMANY Law and Practice Contributed by: Georg Linde and Kamyar Abrar, Willkie Farr & Gallagher LLP
This rule aims to provide transaction security and pro - tect minority shareholders. Permissible conditions typically include: • regulatory approvals (eg, antitrust or FDI clear - ance); • minimum acceptance thresholds (commonly set at 50% or 75%); • delisting or squeeze-out conditions; and • Material Adverse Change (MAC) clauses, provided they are narrowly drafted and objectively measur - able. Despite the statutory emphasis on board neutrality and shareholder autonomy, certain deal protection mechanisms are permissible in friendly transactions, including: • break fees, if proportionate (generally 1–3% of deal value); • matching rights, allowing the bidder to match superior competing offers; • non-solicitation clauses, provided they do not pre - clude the target board from responding to unsolic - ited superior offers; • due diligence rights, particularly in advanced or exclusive negotiations. However, certain US-style deal protections, such as force-the-vote provisions, are not applicable in the German framework. In German public tender offers, shareholders individually decide whether to tender their shares; there is no binding shareholder vote on the offer itself. In conclusion, while private equity-backed bidders can structure conditional offers and seek a degree of deal protection in Germany, they must do so within a legal framework that strictly limits conditionality and prioritises deal certainty and equal treatment of share - holders. 7.6 Acquiring Less Than 100% If a private equity bidder fails to secure complete ownership of a target, it may still pursue additional governance rights to assert control over the company. These rights can encompass board representation,
veto powers on critical decisions (including alterations in business strategy, significant capital investments, or mergers and acquisitions), and influence over the selection of senior management. Typically, these rights are negotiated within a shareholders’ agreement with other principal shareholders or incorporated into the company’s articles of association. In order to facilitate a debt push-down into the target after a successful bid, a minimum of 75% of the vot - ing shares is necessary, as this threshold enables the bidder to pass specific shareholder resolutions essen - tial for capital restructuring, such as the endorsement of a domination agreement or profit transfer agree - ment, which are frequently employed to support a debt push-down by allowing the target’s cash flows to cover the acquisition debt. Under German law, squeeze-out mechanisms are accessible for bidders who attain substantial owner - ship percentages but do not reach 100%. If the bidder achieves 95% ownership of the target’s share capital, it can commence a squeeze-out in accordance with the German stock corporation law, mandating the remaining minority shareholders to divest their shares at a fair cash compensation. If a merger follows this, 90% ownership may suffice. 7.7 Irrevocable Commitments It has become increasingly common in German takeo - vers (particularly those backed by private equity spon - sors) for bidders to secure irrevocable undertakings from key shareholders to tender their shares. These undertakings are typically concluded before the pub - lic announcement and are designed to increase deal certainty and achieve acceptance thresholds. Commitments of this nature are typically binding and cannot be withdrawn, even when there are better offers available. However, where institutional or fidu - ciary shareholders are involved, a limited “fiduciary out” clause may be negotiated, allowing withdrawal in the event of a superior offer that must be accepted to comply with fiduciary duties. These agreements typically restrict transfers, prohibit support for competing offers, and may include stand - still provisions. Although enforceable under German
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