Beratungsfelder: Corporate Law & M&A

The purchase or sale of companies or parts of companies is, you guessed it, considerably more complex than that of a car. This does not only apply if a listed target company is to be taken over by way of a public offer to the shareholders (takeover) or if a large number of potential buyers are to be approached in parallel as part of a bidding process. The sale and purchase of a medium-sized company is also a challenging undertaking for those involved. Once the business people have agreed on the key data for such an acquisition and these have been set out in a letter of intent (also known as a memorandum of understanding or term sheet) or an indicative offer from the prospective buyer, the company is put through its paces in a so-called due diligence process with the help of external consultants, with a commitment of the company’s own human resources that should not be underestimated. Do the assumptions made explicitly or implicitly in the letter of intent or the indicative offer regarding the legal, tax, business, technical, etc. status of the target company prove to be reliable? Are the assumptions made in the letter of intent or indicative offer explicitly or implicitly reliable? At the same time, the transaction will be (further) structured from a tax and legal perspective. Should the company shares be acquired (share deal) or, e.g. in the case of a sale out of insolvency (distressed M&A), only the essential assets (asset deal)? Should the purchase price be fixed on the basis of the most recent balance sheet figures (locked box) or initially only provisionally estimated and adjusted after conclusion of the purchase agreement on the basis of a closing balance sheet to be prepared on completion of the transaction (closing accounts)? The purchase agreement is also drafted and negotiated at the same time as the due diligence process, and its structure is usually based on established market standards. Nevertheless, every case is special and the devil is in the detail. Some risks arising from the extensive seller warranties and indemnity obligations regularly contained in the purchase agreement can be significantly reduced by taking out W&I insurance (Warranty & Indemnity Insurance) – to the benefit of both parties. Even after the signing and closing of a company purchase agreement, it is important to manage not only the operational but also the legal tasks involved in merging the acquired company with existing operations or parts of operations of the buyer or buyer group (post-merger integration). If necessary, we will be happy to assist you in settling any disputes that may subsequently arise between the seller and the buyer. However, we prefer it even more when clear and forward-looking contract drafting pays off and avoids disputes from the outset.

Shapeshifters are not only found in fantasy literature. Companies can also put on a new legal outfit. By means of a change of legal form, a partnership (e.g. a general partnership or a limited partnership) becomes a corporation (e.g. a stock corporation or a limited liability company) or vice versa – and remains essentially the same with all the same rights and obligations as before. However, the Transformation Act also offers various possibilities for a company to dispose of all of its assets – or certain parts thereof – with all rights and obligations, without liquidation and without the consent of affected employees and other contractual partners, and transfer them to another company (so-called – complete or partial – universal succession). This can be done by merging the assets into another legal entity that either already exists (merger by absorption) or, if two companies join forces to rise from the ashes like a phoenix in a new form, is created specifically for this purpose (merger by new formation). The other way round is a demerger, in which a company is either split into two new legal entities (demerger sounds painful and yes, the transferring legal entity is lost). Or the company remains in existence and transfers only a certain part of its assets to another legal entity, either by way of a spin-off (in which case the shareholders of the transferring company receive shares in the acquiring legal entity) or a spin-off (in which case the transferring company itself receives the shares in the transferring legal entity). If other consideration is to be granted instead of shares, the so-called transfer of assets is available for this purpose. What all reorganization measures have in common is that they are planned and implemented hand in hand with tax advisors, a variety of forms and deadlines must be observed and due consideration must be given to the legitimate interests of minority shareholders (keywords: cash compensation and appraisal proceedings), employees and other contractual partners.

The articles of association are the legal foundation of every company. This not only defines the essential foundations of the company, but also offers the opportunity to adapt the internal structure of the company to the legal standard by means of individual regulations. From the precise definition of qualified majorities for individual or all resolutions, restrictions on disposal and pre-emptive rights to termination and redemption options, numerous adjustments can be made in a partnership agreement. At the same time, a resilient partnership agreement always takes into account potential conflicts in order to provide the shareholders with individual and appropriate solutions in such cases.

Some agreements between individual or all shareholders should not be set out in the articles of association and should therefore be publicly accessible via the commercial register. Nevertheless, there is often a great need to agree special rights and obligations between the shareholders in a legally secure manner and, for this purpose, to include customized voting rights and obligations, co-sale rights and obligations (tag-along, drag-along) or individually negotiated preferential rights in a shareholders’ agreement.

You will hardly experience a working day on which you are not confronted with questions of commercial law, regardless of whether these are your own terms and conditions of delivery or purchase, ongoing agreements with customers or project-specific contracts. With our many years of experience, we can help you with the rapid provision of standard contracts as well as with the drafting of complex special agreements. We can also check the rules and regulations of your business partners and assist you in contract negotiations.