When selling a company in Germany, it makes sense for the seller to consider in good time which criteria are essential for a successful sale of the company from his point of view.
Deal security is decisive for the selection of the buyer
When selecting a potential buyer, it is not only the highest purchase price offer that should be decisive.
We recommend, for example, also considering aspects of deal security, i.e. the question of whether the sale can also be completed without problems if the parties reach agreement.
One aspect of this is the possible requirement of an antitrust filing for the transaction. If the sales of the company being sold and the buyer exceed certain thresholds under German or EU antitrust law, a notification must be submitted to German or EU antitrust authorities before the purchase is completed.
This not only costs time and money. Under certain circumstances, the antitrust authorities may prohibit the purchase or order that the purchase may only be completed subject to conditions (i.e. modified from the parties’ original intention).
Is it a relevant business sector according to the Foreign Trade and Payments Ordinance?
Another aspect is the origin of the potential buyer. In the case of a purchase by a buyer from outside the EU states, approval by the Federal Ministry of Economics may be required if the company being sold is active in certain areas in the Foreign Trade and Payments Ordinance that are considered essential for the public order or security of the Federal Republic of Germany. The catalog of relevant business areas is broader than one might think.
Another aspect for buyer selection is the question of whether the potential buyer is willing and able to pay the agreed purchase price in full upon completion of the business acquisition or whether part of the purchase price is to be paid at a later date, e.g. because the buyer must first generate the purchase price from the earnings of the purchased business. For the seller, later purchase price installments lead to the risk of having to enforce purchase price claims in court proceedings and possibly abroad. However, bank guarantees or other means of security can reduce risks here.
Early consideration of the essential conditions of sale in the negotiations
In addition to criteria for buyer selection and the amount of the purchase price, there are certain conditions of the company sale that are very essential from the seller’s point of view and should therefore be introduced early in the negotiations. Often, the negotiations on the conclusion of a letter of intent (LOI) on the purchase between the seller and the potential buyer is the right time for this.
From the seller’s point of view, this should include limiting its liability under the purchase agreement to as small a sum as possible and for as short a period as possible after completion of the purchase. In addition, if there are multiple sellers, each seller’s liability should be limited in proportion to its share of the purchase price. If multiple sellers have been involved to varying degrees in the management of the business, the extent of the warranty provided by each seller should possibly vary.
Who will be on the management team after the sale?
The potential buyer’s plans for the company to be sold can be a decisive criterion. If the seller is concerned about preserving the company being sold and the jobs, he should ask the potential buyer about his plans for the company at an early stage.
In cases where the seller(s) is/are also active in the management of the company, the question also arises as to whether and for how long they should continue this activity after completion of the purchase. Some sellers want to leave the company immediately after the sale, others prefer to continue working for the company despite the sale. On the other hand, buyers also often wish to continue any activity of the sellers in the company, at least for a transitional period.
We accompany your ideal company sale
In addition, there are many other criteria that are essential for the seller(s) in the individual case for the optimal company sale. These criteria should be clarified at an early stage. It is also necessary to decide in good time how these criteria can best be taken into account in the selection of the buyer, the conduct of negotiations and the execution of the sale of the company. We are happy to support our clients in this process. The best way to do this is to involve us at an early stage of the company sale. Feel free to contact us directly with your questions!
Buying a company: Legal advice and review from the beginning are crucial for success
“Best Effort” obligations in the acquisition of companies and in contracts in Germany