GERMANY Law and Practice Contributed by: Marc Löbbe, Michaela Balke, Oliver Schröder and Martin Kolbinger, SZA Schilling, Zutt & Anschütz
5.3 Scope of Due Diligence The target company’s management is gener - ally permitted to disclose company information to a potential acquirer only if doing so aligns with the company’s best interests; this deter - mination must be assessed on a case-by-case basis. Nonetheless, both public (except hostile) and private transactions commonly involve pur - chaser due diligence, the scope of whichlargely 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. The impact of the COVID-19 pandemic on the business case has emerged as a new 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 target company. Therefore, the target company sometimes demands standstill agreements as a means of defence. Although standstill agree - ments are generally permitted under German law, they are rare in Germany. In addition, in a public offer for control, a bidder must extend its bid to all shares of the target company, prevent - ing a standstill agreement. An exclusivity agreement, in contrast, obliges the seller of the target company not to nego - tiate 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 invest - ments in the course of preparing for the trans - action.
• “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 confiden - tiality of that information. “Market sound- ing” an issuer may disclose possible inside information to potential investors to determine the interest of potential inves - tors in a possible transaction. The legal requirements for these exceptions to grant relief are quite complex, so it is recom - mended, 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 Regu- lations ). 5.2 Market Practice on Timing Although all parties involved – the target com - pany, the bidder and the seller – are usually inter - ested in avoiding early disclosure, it is not pos - sible to defer from legal requirements. However, the parties may attempt to structure the transac - tion 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 cer - tain conditions are met (see 5.1 Requirement to Disclose a Deal ). In this context, the disclosure of the transaction can no longer be delayed if there are already sufficiently accurate rumours about the transaction in the market, in which case the issuer must disclose the inside infor - mation to the public as soon as possible.
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