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The 5 key steps to prepare your M&A operation in Germany

M&A germany 5 key

April 2023

External growth is one of the quickest ways, for SMEs to grow their business and expand their operations (activities, services, clients) abroad. However, a Merger & Acquisition process faces many challenges, especially in an international
context.

5 prerequisites are critical, before beginning your M&A operation in Germany.

Integrate external growth into your development strategy

External VS Organic growth: Define the best way to enter a new country, new market. External growth strategies (M&A or Strategic alliances), can be quicker in most cases, but preliminary analysis is mandatory before launching a full process. It can lead to value loss if not done correctly.

Verify your financing capacity (level of Enterprise Value) to assess the size of the target you can aim for.

Appoint a Project Manager

Name a Project Manager within your organization that will link all parties involved in the M&A operation (advisors, targets, banks, etc.)

Depending on the size of the project, define the scope of responsibilities of each member involved in the project.

In Germany: It may take some time to get initial feedback from the German targets, but once the interest of a target has been validated, it is important to be reactive and to be able to introduce the same people to the Germans, to ensure a good follow-up throughout the mission.

Define the ideal target

  • Define the company size (employee, revenue/EBITDA, balance sheet.)
  • Define the activity/services/products/sectors/ clients
  • Define the geographical scope (region, country)
  • Define the other criteria (type of ownership, type of acquisition, type of clients, management team, etc.)
target

Adapt to cultural differences

/ Approach the potential targets: The first approach in the M&A operation is always complicated as we do not know if the targets are ready to sell their companies or open to sharing information. The idea is to create the opportunity. Each approach must adapt to cultural specificities to maximize the chances of opening the door and getting information.

In Germany: Our local teams approach the targets directly by phone and organize the first meeting in German to discuss your company and your objectives and those of the targets. The first approach in German allows to reassure the interlocutors a little and allows first fluid exchanges.

/ Negotiation phase and the M&A process: Adapting to cultural differences is key: respect the agenda/calendar, communicate clearly, do not rush, and communicate in advance, if changes any.

In Germany especially: Your presentations and arguments have to be explicit. well-founded, short, straight to the point, instructive and technical during exchanges. The relationship is not limited to meetings: make sure you stick to the schedule and if you have to cancel or postpone a meeting or a call, let your contact know well in advance and agree on a new date.

Specify the schedule & prepare your documents

Define the planning of the M&A operation for the main steps: Duration of each step (2 months for the screening, 2-3 months for the approach phase, 4 months for Due Diligence, etc.). It’s mandatory to be structured and plan.

Adapt to the agenda/calendar of each target (might be quicker than expected if the target is in an active sale process/longer if the target is initially not ready to sell).

A M&A operation requires a large number of documents. You need to prepare the following:

  • The Letter of Intent (LOI): A document outlining an agreement between two or more parties before the agreement is finalized.
  • Data rooms (online data room): running a data room process requires gathering confidential documents that third parties (lawyers, investment banks, chartered accountants, etc.) may then access more easily during the process
  • Due diligence: the process through which a potential acquirer evaluates a target company or its assets for an acquisition. The relevant areas of concern may include the financial, legal, labor, tax, IT, environment, and market/commercial situation of the company.
  • After due diligence is completed, the parties may proceed to draw up a Definitive Agreement, known as a “merger
    agreement,” “share purchase agreement” or “asset purchase agreement” depending on the structure of the transaction.

ALTIOS teams can help you succeed your M&A operations, as well as guide you through the entire subsidiary set-up process. Book an appointment with one of our experts to discover our personalized offer.

M&A germany 5 key

Looking to move into Germany?

FERRO DUO

Ferro Duo shares its story on how they plan to introduce a new product line in a different sector

The support M+V Altios gave us was exactly what any new business in a new market needs

Alexander Kehrmann
CEO
Challenge
  • Even if Ferro Duo is an established, international name, the company faced a challenge when it added a new product to their range in a sector FerroDuo had little experience with: fertilizers.
Solution
  • An Altios M+V dedicated team mapped out the opportunities for their products in the fertilizers market of four countries (Germany, Italy, France and Spain) and identified leads and opportunities by cold calling.
Result
  • Leads were identified in every markets. In Italy, some leads have already been turned into business opportunities.

You would like to know more about FerroDuo’s story and its last challenge?

Discover more about FerroDuo on: https://www.ferroduo.com

Company Profile

Founded in 2002

Headquarters: Germany

Expertise: recycling products from various industries to recreate new ones

Target countries: Italy, Germany, Spain and France

format vertical site internet success story Ferro duo

The establishment of a subsidiary is the preferred way to set up a company in Germany, as it is a genuine and legally independent company under German law. It is the most advanced form of establishment for carrying out the economic activity with a strong grip on the German market, due to the fact that it has a legal structure the Germans know, which is reassuring to them.

Here are the 7 steps we have compiled to help you set up your subsidiary in Germany:

1) Getting an address/ business domiciliation in Germany

The first thing to do is to have an address or a business domiciliation in Germany, before taking any steps in the country, to be able to start the process of creating a subsidiary.

2) Selecting the right legal form

German company law offers different legal structures for setting up a German subsidiary, which enables you to choose one depending on your business purposes.

Here are the main types of companies in Germany:

3) Confirm the name of your company with the commercial register (Unternehmensregister)

You must make sure that you can use the name of the company you want. Thanks to the Unternehmensregister website, you can easily and quickly search for already registered company names and check that yours is unique.

4) Open a bank account

You must then open your own bank account in Germany. Opening a bank account does not involve a lot of red tapes, as it is done in accordance with standard international practice. Many German banks allow you to set up accounts online, which means you can do this step remotely – but be aware that most bank websites will be entirely in German. Make sure you provide proof of your identity – this can be done at your local post office, or you can ask a notary or lawyer to help you check your identity.

You can also make your request by going to the bank in
person. In this case, you or your representative may be asked to present your
passport or identity card, as well as a Meldebescheinigung (“certificate
of registration” – your proof of residence in Germany).

5) Provide the necessary documents for setting up a business

The legal form of the company determines the necessary documents and evidence. In all cases, the following administrative formalities must be carried out:

It should be noted that there are certain sectors of activity in Germany for which specific authorization is required (e.g. transports, estate agencies, surveillance companies, etc.). The Gewerbeamt is likely to indicate any additional steps to be taken. 

6) Registration in the Commercial Register of the lower regional court (Amtsgericht)

Next step: Your
entry in the Commercial Register of the lower regional court (Amtsgericht).

You must submit your documents to the Commercial Register through the notary. If the essential information about your registered company (company name and registered office, authorized representatives, legal form, as well as share capital or shares) is accepted, your new company will be published on the Handelsregister website.

The final step
is to register your new business with the local tax office within four weeks of
opening and within one month of certification of the articles of association by
a notary.

7)  Registering with the tax office

You now know the key steps to setting up your
subsidiary!

ALTIOS is always at your disposal to guide you through all the steps involved in setting up a new German company or expanding an existing one. We will be happy to put you in touch with the appropriate lawyers, tax advisors, attorneys, and other experts needed to realize your investment project.

Please do not hesitate to call us on +49 (0)69 24 74 102 – 14 or contact our business developer Juliette Cabot at j.cabot@altios.com