Mergers - Germany

Updated 11/2010

Legal requirements

Depending on the legal form of the businesses involved, other laws also apply in addition to the Restraint of Competition Act (GWB), e.g.:

Stock Corporation Act
Securities Trading Act
Limited Companies Act
Reorganisation Act
Commercial Code
Industrial Code (Gewerbeordnung)

Further information:

Chambers of Industry and Commerce
Restraint of Competition Act

Types of merger

Business mergers can take multiple forms under company law. A merger occurs when two or more businesses combine to form a new business. In the process they give up some or all of their independence and at the same time enter into a new, long-term business relationship. This can happen through the merger of two or more hitherto independent companies to form a single legal entity, the division of a business and the transfer of the (split or breakaway) assets to another legal entity; or by listing the company or its divisions as an investment in kind, when setting up another business, or as a capital injection.

A merger within the meaning of the Restraint of Competition Act (GWB) only occurs in the following cases:

Acquisition of another company’s assets – entirely, or a significant proportion thereof.
Acquisition of sole or joint control over one or more companies. Control can be based on rights, contracts or other means providing a defining influence over these activities, e.g. voting rights, appointments to company bodies, etc.
Acquisition of between 25% and 50% of company shares, including by accumulation up to these thresholds. Where several companies acquire such shares, they are also deemed to have become merged in the market of the company concerned. This also covers the establishment of a joint undertaking.
Significant influence on competition.

Merger conditions

Mergers between businesses with a combined turnover worldwide of under EUR 500 million are not subject to merger control.

The Federal Cartel Office scrutinises planned mergers only where:

they have an impact within Germany
the businesses concerned have a combined worldwide turnover of more than EUR 500 million, at least one of the businesses involved has domestic turnover of more than EUR 25 million, and another has achieved domestic sales of at least EUR 5 million

there is no so-called Anschluss (where an independent company with a sales volume worldwide of under EUR 10 million merges with other companies)
no cases involve a so-called ‘bagatelle market’ (a market offering goods or commercial services for at least five years and which generated turnover of under EUR 15 million in the last calendar year)
where the European Commission does not have exclusive competence in the intended merger (total turnover worldwide of all participating companies of over EUR 5 billion, aggregate turnover for at least two of the companies of over EUR 250 million each, and none of the companies produces more than two-thirds of its EU-wide turnover in a single Member State)

The Federal Cartel Office must block the merger if it is likely to create or reinforce a dominant market position, unless the businesses concerned can demonstrate that the merger will also improve competition conditions in a way that will outweigh the disadvantages in terms of market dominance (Abwägungsklausel, or ‘balancing-test clause’).

If no market dominance is expected or the balancing-test clause applies, the Federal Cartel Office will approve the proposal, possibly subject to terms and conditions.

Federal Cartel Office
Restraint of Competition Act

Buying an existing company, with an already established structure, can be a good way of expanding your business.

Takeovers — Germany

Administrative procedures

Reporting obligation

Mergers requiring control must be reported to the Federal Cartel Office before they are completed. Unapproved plans may not be completed during review periods (transactions in breach of this are ruled invalid; any breaches may attract financial penalties). Companies whose main office is not in Germany have to appoint a representative in Germany.

The first phase of the process runs for one month. Within a month following receipt of the full notification, the companies involved will be informed in a ‘monthly circular’ of the fact that the relevant department taking the decision has embarked on the primary verification procedure (‘second phase’) if, on preliminary examination, a more detailed investigation appears necessary. During this second phase the Federal Cartel Office will issue a formal decree within a further three months, either blocking or allowing the merger. The period may be extended subject to agreement from the parties to the merger.

Federal Cartel Office
Controlling mergers: fact sheets and forms

Registration

In the case of a merger in the form of an amalgamation or division, each of the companies involved must enter it in the Commercial Register. Any such registration should be accompanied notably by the original or a certified copy of the amalgamation/division agreement and the amalgamation/division decision and a current balance sheet. Provided all the requirements are met, the amalgamation/division is entered in the Commercial Register and notified. If a limited company is involved, the amalgamation/division agreement must reach the Commercial Register before any general meeting has been convened.

In cases involving the sale of at least three quarters of the shares, the conclusion of a control and/or profit and loss agreement is then considered. Any such agreement must be entered in the subsidiary’s Commercial Register listing.

IHK Frankfurt am Main: information on commercial register entries

Resources

The procedural conditions for merger control in Germany are set out in the corresponding fact sheet from the Federal Cartel Office.

Federal Cartel Office: fact sheets on merger control

Check also the legislation on this topic in:

Mergers - Germany