GERMANY Law and Practice Contributed by: Marc Löbbe, Michaela Balke, Oliver Schröder and Martin Kolbinger, SZA Schilling, Zutt & Anschütz
mechanism with working capital adjustment at closing; • seller warranties; • potential specific indemnities (particularly on tax matters); • provisions on available remedies; • closing conditions; and • seller and purchaser covenants. W&I insurance W&I insurance has gained significant importance in recent years and has become common in most private equity and many non-private equi - ty transactions, with the level of seller exposure having migrated to non-recourse models and special coverage being available for historically uninsurable items (such as tax or antitrust risk; “blind-spot” coverage may even be available in special situations). In distressed M&A situations, purely synthetic W&I insurance has also become available. Insurance is almost always taken out by the purchaser, but can be pre-arranged by the seller in (soft or hard) stapled form. The prevail - ing use of W&I insurance is expected to continue and should be considered a part of the standard M&A toolbox suitable for most transactions. Public M&A – Acquisitions of Listed Companies The most practical way to obtain control over a publicly listed company in Germany is to acquire shares by way of a public takeover offer (see 6. Structuring ), often in conjunction with stake - building measures and/or pre-agreed acquisi - tions of shares from key shareholders (see 4. Stakebuilding ). A public takeover offer can be friendly or hostile. Although the management board of the target company is subject to the principle of neutrality, certain defence measures can be implemented
with the consent of the supervisory board (see 9. Defensive Measures ). Joint Ventures Joint ventures are often only seen as a tool to jointly develop a new business, but they can also be used for M&A activity. In a standard M&A scenario, control in a business transfers from the seller to the buyer, but a joint venture structure may be chosen where the seller shall stay involved and the seller and buyer intend to establish co-operation in relation to the target. In this situation, a deal has both a transaction component and a co-operation component. The transaction side of a joint venture relates to the buyer as a new partner joining the existing business by: • acquiring shares in the joint venture vehicle previously held by the seller; • joining as a new shareholder in such vehicle by way of a capital increase; or • establishing a new joint venture entity to which the seller transfers the existing busi - ness. The transaction part of setting up a joint ven - ture usually involves similar steps as a stand - ard M&A transaction, such as non-disclosure arrangements and a due diligence review of the existing business. The co-operation side of the deal consists of setting up the joint venture structure, including corporate governance rules and exit arrange - ments. 2.2 Primary Regulators Antitrust and FDI Regulators There is no single general M&A regulator in Ger - many. Depending on the industry the transaction
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