The favourable environment is contributing to the increasing significance of M&A transactions among German businesses again, with mergers and acquisitions supposed to be a way for companies to strengthen their market position.
GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: Handelsblatt reports that the number of mergers and acquisitions has not been this high since 2008. One reason for this is the favourable environment stemming from the ECB’s interest rate policy and competition from China. Chinese firms are increasingly banking on M&A transactions. In order to be able to ward off their competition as well as solidify and expand their own position in the market, German companies also now appear to be relying on mergers and acquisitions as a way of obtaining growth.
The policy of the European Central Bank fits in with these firms’ agenda. Low interest rates and the purchase of corporate bonds have made it more affordable to finance the borrowed capital required for M&A transactions and meant that businesses can go on the offensive.
In cases involving cross-border mergers and acquisitions, businesses not only have to consider the economic circumstances but also the different legal rules of the respective countries. Otherwise, this may ultimately result in infringements of competition law or antitrust law. This, in turn, can give rise to costly sanctions and time-consuming legal disputes. It is equally important to observe the various tax regulations.
With every opportunity that presents itself to strengthen one’s business by way of mergers or acquisitions, the level of risk involved ought to be kept to a minimum. That is why a due diligence review should always be carried out in order to carefully scrutinize potential takeover plans. What are the company’s strengths and weaknesses, how have the employment contracts been drawn up, what orders and liabilities are there? These and other questions can be clarified with a due diligence review, thus helping to minimize the risk.
Complex corporate mergers and acquisitions necessitate a comprehensive economic assessment and legal advice. Getting both of these things from a single source can prove to be effective and save a lot of time. Interdisciplinary law firms with specialized lawyers that cooperate with international partners are able to take a solution-oriented approach to achieving these goals.
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