German Legal, Tax and Financial Due Diligence
Due Diligence for Purchaser | Vendor Due Diligence | Post-Merger-Due-Diligence in Germany
3Q|Law: Your German M&A specialists for all type of due diligence in company or real estate acquisitions in Germany
Due diligence is of central importance in the context of company acquisitions in German, but also in real estate transactions or IPOs in Germany. As lawyer and tax experts specializing in company acquisitions, this is a focal point of 3Q|Law's consulting activities. The title "specialist lawyer for company acquisitions" or "specialist lawyer for M&A" does not yet exist, so that specialization and practical experience in the field of M&A are of primary importance. However, we do not only support you with a German Legal Due Diligence, but also German Tax Due Diligence and, if required by you, also a Financial Due Diligence.
The term "due diligence" comes from Anglo-American law and means "due diligence" in the examination of a company as a potential object of purchase. The meaning and purpose of a due diligence review, the individual subjects of the review and the necessity of organizational measures can only be understood when the legal framework conditions for the buyer and seller as well as for the acting persons are clearly in mind.
First of all, from the point of view of the buyer of a company in Germany, it is a question of finding out whether the target company in question is actually an attractive object for purchase or whether risks or other disadvantages outweigh the benefits, making it necessary to refrain from buying the company as a whole.
In addition, the seller of the company has a duty in Germany to provide clarification, particularly if the buyer of the company has asked specific questions. From the buyer's point of view, it is therefore also a question of addressing questions to the seller as comprehensively and specifically as possible in order to trigger duties of clarification and thus, on the one hand, to learn more about the target company and, on the other hand, to have arguments for asserting claims in the event of an emergency.
On the other hand, it could happen to the company purchaser that the complete omission of a due diligence is classified as grossly negligent ignorance of the defect on the part of the purchaser within the meaning of § 442 German Civil Code (BGB) and thus leads to the loss of rights. As publisher and author of the "Beck'schen Handbook for the Acquisition of Midsize-Companies in Germany ", Dr. Jaques can provide you with comprehensive advice. 3Q|Law also stands for lateral thinking, quality and quintessence.
If the entrepreneur as seller wants to achieve the highest possible sales price and also avoid the so-called "information in the dark" - which could possibly justify an accusation of fraud - a so-called seller due diligence is recommended, i.e. a fundamental (preliminary) examination of the company by the company seller himself in order to identify potential for increasing earnings and other opportunities or risks, which ultimately have an impact on the company purchase price and should therefore be optimized if possible before the actual sales process begins. 3Q|Law is happy to assist you in this process.
In addition, on the seller's side it is a question of being able to prove the buyer's knowledge of defects in the company or other object of purchase (e.g. real estate) on the basis of the buyer's due diligence in an emergency, in order to exclude or reduce the buyer's claims.
Due diligence in Germany from the perspective of the management of company buyers and company sellers
The legal and judicial developments of recent years and the current public mood with regard to managers as a result of the financial market crisis are particularly relevant for assessing the liability risks of board members, managing directors and supervisory board members in Germany acting in connection with a company purchase or sale (mergers & acquisition - M&A in Germany). According to the prevailing opinion in case law and literature, under German Law a board of directors or managing director is generally acting in breach of duty if he or she does not conduct a due diligence review of the target company. Errors made by managing directors, board members, supervisory board members or advisory board members in the acquisition or sale of a company in Germany thus quickly lead to unlimited and personal liability of managers if precautions are not taken early and in a targeted manner.
The purchaser of a German company is also threatened with the loss of rights if, immediately after the transfer of the company, it does not carry out a post-merger due diligence to examine the object of purchase with regard to any defects. Failure to do so may in turn result in personal liability on the part of the management.