M&A - Company acquisition
The acquisition of companies has developed into an independent consulting discipline in recent years. The term "mergers & acquisitions" is used to describe a variety of different transactions in which either the ownership of a company changes hands through a sale (acquisition) or companies merge or enter into some other form of combination (merger). Specialized M&A consultants accompany these transactions as brokers, investment managers, financial advisors or tax consultants.
The legal side of a company acquisition is usually covered by specialized commercial lawyers with a background in commercial and corporate law. These commercial lawyers have the necessary expertise to successfully manage and structure the complex transaction process, which includes legal, tax, commercial and financial aspects.
VOELKER has a team of lawyers who, as specialists in commercial and corporate law, are all particularly qualified to provide comprehensive advice to sellers or buyers in corporate transactions. VOELKER has developed a special expertise in advising small and medium-sized companies from its many years of advising on company acquisitions in the SME sector. A certain process sequence has proven to be standard for structuring a transaction for the acquisition or sale of a company. Such a transaction process usually takes several months and is sometimes particularly dynamic. Good preparation and experienced advisors are important success factors here.
Planning phase, search for a buyer or selection of the target company
The first step is to select a target company from the buyer's perspective or to approach potential buyers from the buyer's perspective. Before the company owner discloses sensitive company data to the prospective buyer, a confidentiality agreement (abbreviated to "NDA" for non-disclosure agreement) should be signed. After this, the prospective buyer is usually given an insight into important key data of the company (e.g. in an information memorandum or in an exposé). The most important key points of the transaction - the transaction structure, the buyer's objectives, the parties' purchase price expectations or the buyer's purchase price offer, the time frame and the further procedure - are described in a letter of intent, which is not yet legally binding. However, this letter of intent can also legally guarantee a buyer exclusivity, according to which the seller is not permitted to negotiate with other interested parties for a certain period of time.
Due diligence
The position of a prospective buyer is characterized by the fact that, as an outsider, he has no precise knowledge of the company as the object of purchase. The seller, on the other hand, has detailed information about the state of the company. There is a symmetry of information between the parties. The prospective buyer therefore has an interest in examining and investigating the object of purchase . the company . in detail before deciding to buy. This examination is necessary in order to accurately determine the value of the company and to be able to assess risks in business operations. Such an investigation procedure initiated by the buyer is referred to as due diligence. The term originates from US law and refers to the necessary care that must be taken by advisors when examining a company issuing on the capital market so that they can exonerate themselves from liability. In a broader understanding, the term due diligence is used in transaction processes for the careful and systematic examination of a company as a purchase object. The aim of due diligence is to provide the buyer with a solid basis for deciding whether to purchase the company. The results of the due diligence are then incorporated into the provisions of the purchase agreement.
The due diligence audit can focus on different aspects. Commercial due diligence analyzes the market position and competitive environment of the target company. Financial due diligence examines the asset, financial and earnings situation of the acquisition target. Tax due diligence examines the tax risks. Legal due diligence deals with all legal aspects of the company. It is divided into the following areas, for example:Corporate structure
Fixed assets, real estate
Customers, suppliers, sales
Personnel matters
Legal disputes
Financing mattersEnvironmental issues
Insurance
The due diligence is usually prepared using a questionnaire (due diligence checklist). The results are summarized in a report (due diligence report).
Drafting the purchase agreement and negotiations
On the basis of a draft purchase agreement, the parties negotiate all open and unresolved aspects of the company purchase. The results of the due diligence review are incorporated into these negotiations. The opportunities and risks of the company are assessed and the price is negotiated. Last but not least, in this phase of the negotiations, the buyer has to deal with the question of how he actually assesses the value of the company and how the purchase of the company and its further business operations are to be financed. This aspect of the transaction is dealt with by the specialist discipline of corporate finance. The negotiation phase is concluded with the signing of the contract. In the case of larger mergers, the transaction must be notified to and approved by the competition authority (cartel office). The purchase process ends with the transfer of ownership and payment (closing).
Integration phase
The success of the integration of the acquired company into the business operations of the acquirer or its group of companies (post-merger integration) ultimately determines whether the transaction process has been successful overall. Processes and structures must be standardized and business units must also be merged organizationally. The reasons for the economic failure of a transaction often lie in this phase.
Forms of transaction
Forms of transaction There are a number of different constellations in which companies are bought or sold. The sales situations, the objects of purchase and also the players differ. The particular characteristics of each type of transaction have a decisive influence on the course of the transaction, the tax structure, the form of financing and the purchase agreement documentation.
Typical sales constellation
The sale to a competitor or to a strategic investor are typical cases of the sale of medium-sized companies. A competitor primarily wants to expand its market share, while a strategic investor rounds off its product portfolio through the acquisition or expands its field of activity outside its actual core area in order to realize synergy effects.
Asset deal and share deal
A company acquisition can also be categorized according to the object of purchase. If a buyer acquires shares in the company that owns the business, this is referred to as a share purchase or a share deal. In this case, the object of purchase is the shares of a GmbH, the shares of a stock corporation or the shares of a partnership. In this case, the purchase takes place as a legal purchase only with regard to the company owner. If it is not the shares in the company that are acquired, but the company itself as a tangible entity, this is referred to as a purchase of assets or an asset deal. All of the company's assets, such as land, buildings or machinery, as well as legal relationships, receivables and liabilities, are transferred individually to the buyer. If the company as a whole is transferred and not just a part of it, the holding company remains as an empty shell after completion and must be liquidated.
Acquisition of participations
If the buyer acquires only part of the shares in a company, this is referred to as a share purchase. In this constellation, special attention must be paid not only to the purchase agreement but also to any shareholder agreements or consortium agreements that regulate how the existing shareholders and the new shareholder work together to successfully manage the company.
Management buy-out / management buy-in
The terms .MBO. or .MBI. stand for the sale of a company to a successor from the management level. If a company owner sells his company to his former managing director or other senior employees, this is referred to as a management buy-out. In a management buy-in, managers with experience in the industry acquire a company from outside in order to set up their own business.
Private equity
Private equity companies are usually funds or groups of investors that acquire stakes in companies or acquire companies outright for investment and return purposes. The term "private equity" refers to a form of equity capital that is not provided via a stock exchange. If the capital is made available to innovative young companies that involve a high level of risk but also offer corresponding growth opportunities, this is referred to as venture capital.
Company acquisition in crisis and insolvency
With the help of sales and restructuring, economically ailing companies can be given a second chance. The purchase of insolvent companies from an insolvency administrator can also be an interesting option for a buyer to expand their own portfolio.