Sale of a company, sale of an investment in Germany
Structuring the sale of a company in Germany from the seller's point of view
If an owner intends to sell his company or his share in a company in Germany, either a financial investor or a strategic investor can be considered as the buyer. The legal form of the target company (GmbH, AG, GbR, KG, OHG or GmbH & Co. KG) plays only a subordinate role for the purchaser ingerman practice - apart from tax aspects. Irrespective of the legal form of the target company, however, the buyer will regularly attach importance to far-reaching guarantees from the seller.
If you are interested in the purchase of a company or shareholding in Germany from the buyer's point of view, please click here: Company purchase Germany/buyer's perspective
Detailed information on the sale of a GmbH and a GmbH & Co. KG under german law can be found here:
- Sale of a GmbH as well as the taxation of the sale of a GmbH.
- Sale of a GmbH & Co. KG as well as the taxation of the sale of a GmbH & Co. KG
Further background information on the contractual structure of the german company purchase agreement can be found here: German Company Purchase Agreement (following soon)
For a non-binding inquiry, please contact one of our experts directly by phone or e-mail or use the contact form at the bottom of this page.
Legal support for the seller of a company in Germany
Our certified specialists for german corporate and tax law as well as our tax advisors accompany sellers in all phases of the sale of a company - at our offices in Hamburg, Berlin, Munich, Frankfurt and Cologne as well as nationwide. Our services include in particular:
- Preparations for contract negotiations, preparation of due diligence and contractual safeguarding of the exploitation of trade secrets
- Company valuation and valuation of shareholdings
- Drafting of the purchase agreement in Germany (SPA - Share Purchase Agreement)
- Development of strategies to avoid liability
- Drafting of individual purchase price clauses and/or purchase price adjustments
- Support during sales negotiations
- Execution of vendor due diligence
- Tax audit and support of the sale of the company
- Post-contractual support of the seller, for example in post-M&A disputes
Different interests of buyers in german practice
Anyone intending to sell their company in Germany should always keep an eye on the possible interests of the buyer side. This knowledge helps on the way to a successful conclusion of the contract negotiations, especially when determining the purchase price. Often, the buyer side is either a financial investor (e.g. a private equity company) or a strategic investor (e.g. a competitor of the target company).
A financial investor as buyer strives for the highest possible risk-adequate profit through a later exit solution. He prepares a divestment from the outset, e.g. through a profitable IPO of the acquired company or a lucrative sale to a commercial partner.
A strategic investor as a buyer, on the other hand, usually aims at synergy effects and a diversification of his business field with his entrepreneurial participation. Furthermore, he often intends to purchase brands, special know-how, technical developments or patents at a favorable price. Often he also wants to gain access to new markets through the purchase or to acquire highly qualified management in Germany.
Preparation of the company sale in Germany
For the seller, the preparation of the company sale is very important in german practice. The sale of a company requires careful, often time-consuming preparation. Even in the case of small and medium-sized companies, the preparation period can take six months or longer. Our legal experience shows that professional legal and tax law preparation of a transaction regularly makes it possible to achieve a higher purchase price and avoid risks.
First of all, adjustments can be made at an early stage with regard to the company's balance sheet policy and personnel development, taking into account the company's economic situation. During subsequent negotiations, the seller must ensure the ability to act within the shareholder group. In particular, behavior must be coordinated at an early stage with non-operating co-shareholders and, at best, contractually fixed so as not to jeopardize the sale. In german practice, opposing shareholders can jeopardize the sale process and use their refusal to accept advantages.
In the run-up to a company sale in Germany, business planning and the valuation of the company are important. As part of the search for potential buyers (financial investor or strategic investor), it is common german practice to prepare a company exposé that highlights all areas of the company and the market environment. It is an important source of information for the buyer. The company exposé is to be understood as an advertising tool.
Evaluation by our expert!
In our team, tax advisor Martin Stürmer takes care of the company valuation for the determination of the purchase price. As a specialized expert, he works together with our lawyers in german corporate law. You can also engage him independently of a legal mandate.
Ask for a quote for a business valuation or a cost-effective indicative business valuation:
Due diligence in the acquisition of a company in Germany
There is an asymmetry of information between the seller and the buyer. Compared to the seller, the buyer is generally much less well informed about the company and the price-relevant data. The so-called due diligence is intended to eliminate the information imbalance between the buyer and the seller.
As part of the due diligence process in german practice, the seller provides the buyer with all relevant company data to enable a systematic analysis. During the due diligence process, the buyer obtains a picture of all value-forming factors and risks of the target company. By presenting and disclosing all value-forming data, the seller can reduce his liability risks in Germany. On the other hand, the seller accepts a liability risk if he does not disclose certain company data. He must then fear that a later disclosure will lead to a reduction in the purchase price. However, at the beginning of a sales process, no relevant trade secrets may be disclosed to prospective buyers.
As part of the german legal due diligence, the following points of the purchase agreement in particular must be regulated on the basis of the existing business, tax and legal conditions:
- Warranty and guarantee clauses and liability standards;
- purchase price, payment modality, purchase price adjustment;
- german labor law regulations, safeguarding the transfer of operations;
- Tax and social security clauses;
- audit clauses;
- antitrust requirements;
- limitation periods;
- restrictions on competition for the seller, if applicable;
- Arbitration clauses.
When regulating the german purchase and transfer agreement, the seller is dependent on qualified legal and tax advice (on the tax implications of a company purchase)
Disputes during the sale of a company in Germany (post-M&A dispute)
If a company sale in Germany is not accompanied by sufficient professional legal support, disputes often arise during or at the latest after the sale. A classic area of conflict in german practice is the so-called purchase price adjustment clauses or downstream purchase price payments (so-called "earn-outs"). However, contractual guarantees are also a frequent cause for dispute.
The situation becomes particularly serious when the seller is accused of fraudulent misrepresentation or even fraud. In addition to high claims for damages, the seller may even face criminal prosecution under german law.
Finally, conflicts also frequently arise in german practice if the seller of the company remains in the company as an executive or even as a managing director even after the sale.
You can find more information on disputes after the sale of a company here: Dispute after company sale in Germany
Legal opinion for cross-border company sales
For domestic and foreign companies, we prepare so-called legal opinions, i.e. legal opinions which provide the interested party with information regarding certain questions of german business law. Often investors or banks and supervisory authorities require a lawyer's confirmation that, for example, a company has been effectively established and that the management is authorized to conduct certain business transactions.
Our role as german business lawyers and tax advisors
As a german business and tax law firm, we assist the seller already in the preparatory phase of a company sale. This applies regardless of whether it is a sale of shares (share deal) or the sale of individual assets (asset deal). Among other things, the seller's interest in keeping company secrets as secret as possible must be taken into account. On the other hand, liability risks must be minimized.
On the seller's side in particular, the taxation of the purchase price also plays a major role in german practice. You can find more information on the taxation of the seller here: Taxation of the sale of a company in Germany (following soon)
Our lawyers, certified specialists and tax advisors at our offices in Hamburg, Berlin, Munich, Frankfurt and Cologne will support you in the sale of your company. Our services also include advice on the creation of a data room, which serves as the basis for a due diligence review to be carried out by the buyer. Finally, we draft and negotiate the purchase and transfer agreement for and with the seller, taking into account all relevant german legal and tax aspects.