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Results: 4 Answers
Merger Control
2.
Definitions and scope of application
2.1
What types of transactions are subject to the merger control regime?
 
Germany
The following types of transactions are subject to the German merger control regime, provided that the jurisdictional thresholds are met:

  • acquisitions of all or of a substantial part of the assets of another undertaking;
  • acquisitions of direct or indirect control by one or several undertakings of the whole or parts of one or more other undertakings (see question 2.2);
  • acquisitions of shares in another undertaking resulting in a shareholding of at least 25% or 50% of the capital or voting rights; and
  • any other combination of undertakings that enables one or several undertakings to exercise directly or indirectly a competitively significant influence on another undertaking (see question 2.3).

The acquisition of all or a substantial part of the assets of another undertaking includes asset deals. An acquisition concerns a substantial part of the assets if the assets represent:

  • a market position which may be transferred to the acquirer as a result of the transaction; or
  • a substantial proportion of all assets of the seller.

For acquisitions of 25% or 50% of the capital or voting rights in another company it is irrelevant whether they will confer control or any sort of influence over the target; in other words, this is a purely quantitative assessment. Shares already held by the acquirer will be considered, as will shares held by another undertaking for the account of the acquirer. The two thresholds apply independently of each other – that is, an acquirer which has already notified an acquisition of 25% (but less than 50%) may need to notify a subsequent acquisition of 50%.

For more information about this answer please contact: Daniel Wiedmann from P+P Pollath + Partners
2.2
How is ‘control’ defined in the applicable laws and regulations?
 
Germany
The definition of ‘control’ essentially corresponds to the definition applied at the EU level (Article 3 of the EU Merger Regulation). Control can be acquired on the basis of rights, contracts or any other means which – either separately or in combination, and having regard to all factual and legal circumstances – confer the possibility of exercising decisive influence on an undertaking.

Control can be acquired not only on a de jure basis (eg, based on a majority of the voting rights in the target), but also on a de facto basis (eg, if it may be expected that the acquirer will achieve a majority at the shareholders’ meetings of the target, considering the level of its shareholding and the evidence resulting from the presence of shareholders at the shareholders’ meetings in previous years). Further, a situation conferring control also exists if the acquirer will be in a position to veto strategic decisions in the target (so-called ‘negative control’), such as decisions on the appointment or dismissal of management, financial budget, business plan, investments and/or market-specific decisions. Joint control is deemed to exist if several shareholders will be in a position to independently veto such decisions.

German merger control also covers transactions that will lead to a change in the quality of control – in particular, a change from sole to joint control (or vice versa), or the entry of an additional jointly controlling shareholder.

For more information about this answer please contact: Daniel Wiedmann from P+P Pollath + Partners
2.3
Is the acquisition of minority interests covered by the merger control regime, and if so, in what circumstances?
 
Germany
An acquisition of a minority interest is covered if at least a 25% interest, control or a competitively significant influence is being acquired.

An acquisition of a competitively significant influence typically covers acquisitions of a shareholding of less than 25% if additional factors are present, making the acquisition comparable to an acquisition of 25% or more. Relevant factors may include the possibility to appoint members of the (supervisory or management) board, veto rights, de facto blocking minorities or even information rights. A significant competitively influence is less than control. The acquirer must merely be in a position to influence, but not control, the decision-making process of the target. Such influence must be relevant from a competition perspective. In practice, this relates to situations where the acquirer is a (potential or actual) competitor, or operates on a market downstream or upstream to the market of the target.

For more information about this answer please contact: Daniel Wiedmann from P+P Pollath + Partners
2.4
Are joint ventures covered by the merger control regime, and if so, in what circumstances?
 
Germany
If there are two or more shareholders that will each hold at least 25% of the shares in the target after the transaction, or jointly control the target after the transaction, a joint venture is deemed to exist under German law. As consequence, the turnover of each such shareholder will need to be considered when assessing whether the jurisdictional thresholds are met. For example, if Company A acquires 25% of the shares in Company D and Companies B and C will each retain a shareholding of at least 25%, the turnover of each of A, B, C and D will need to be considered.

German merger control law applies to full-function and non-full-function joint ventures. In other words, the requirement under the EU Merger Regulation that a joint venture be full function does not exist under German law.

For more information about this answer please contact: Daniel Wiedmann from P+P Pollath + Partners
2.5
Are foreign-to-foreign transactions covered by the merger control regime, and if so, in what circumstances?
 
Germany
Foreign-to-foreign transactions that meet the jurisdictional thresholds are subject to German merger control if they are capable of having an ‘appreciable effect’ within Germany. The German courts and the Federal Cartel Office (FCO) have interpreted this requirement very broadly. According to the FCO, a transaction clearly qualifies as having an appreciable domestic effect if the turnover thresholds (see question 2.6) are met and the target had a turnover exceeding €5 million within Germany. If the target does not exceed this threshold and the two domestic turnover thresholds are triggered only by its parents, the question of whether sufficient domestic effects can be expected requires a case-by-case assessment and will depend on the circumstances of each individual case.

The FCO has published a guidance paper entitled “Domestic Effects in Merger Control” that explains its analysis for such cases. In particular, it will be relevant whether the target operates on a geographical market that includes Germany (eg, an EU-wide market) and if so, its position on such market, as well as its parent’s activities.

For more information about this answer please contact: Daniel Wiedmann from P+P Pollath + Partners
2.6
What are the jurisdictional thresholds that trigger the obligation to notify? How are these thresholds calculated?
 
Germany
Following an amendment to the Act against Restraints of Competition (ARC) in 2017, there are now two alternative sets of thresholds. Besides the traditional turnover-based threshold, there is also an alternative threshold that takes into account the transaction value. German merger control applies if one of these sets of thresholds is triggered.

The turnover thresholds (referring to the last full business year) are triggered if:

  • the combined worldwide turnover of all undertakings concerned exceeded €500 million;
  • one undertaking concerned had a turnover exceeding €25 million within Germany; and
  • at least one further undertaking concerned had a turnover in Germany exceeding €5 million.

The alternative thresholds (taking into account transaction value) are triggered if:

  • the combined worldwide turnover of all undertakings concerned exceeds €500 million;
  • one undertaking concerned had a turnover exceeding €25 million within Germany, but neither the target nor any other undertaking concerned had turnover of more than €5 within Germany;
  • the transaction value exceeds €400 million; and
  • the target has significant activities in Germany.

The ‘undertakings concerned’ are always the acquirer and the target. However, if another party either (solely or jointly) controls or holds an interest of at least 25% in the target, its turnover must also be taken into account. The turnover figures of each undertaking concerned must include the net turnover generated by its group (excluding intra-group turnover) in the full financial year preceding the transaction. This includes 100% of the turnover of jointly controlled companies. If necessary, adjustments should be made in order to include the turnover of acquired companies or deduct the turnover of divested companies. Geographically, turnover should be allocated to Germany if products are sold or services are provided to customers in Germany. An exception to this rule is banking or financial income, which should be allocated to Germany if it is received by the branch or division of a credit or financial institution established in Germany. There are specific rules for the calculation of the turnover of certain companies, including media companies, insurance companies and credit and financial institutions. In particular, eight times the amount of the turnover achieved by certain media companies (active in the area of newspapers, magazines, radio and television) must be taken into account.

If two or more transactions are effected between identical acquirers and sellers (including their respective affiliates) within a period of two years, they shall be treated as a single transaction if, as a result, the above thresholds are met for the first time. Further, several transactions may be regarded as a single transaction if they are interrelated.

‘Transaction value’ includes (but is not limited to) cash, securities, company shares not traded as securities, other assets (eg, real estate, tangible assets, current assets), intangible assets (eg, licences, usage rights, rights to a company name and trademark rights), liabilities assumed and consideration for non-competition. In addition, parties must take into account future and variable purchase price components (eg, earn-outs). ‘Significant activities in Germany’ are activities that do not yet account for significant turnover, but indicate a significant competitive potential. The FCO has published a guidance paper, entitled “Guidance on Transaction Value Thresholds for Mandatory Pre-merger Notification”, that provides further details on both concepts.

For more information about this answer please contact: Daniel Wiedmann from P+P Pollath + Partners
2.7
Are any types of transactions exempt from the merger control regime?
 
Germany
The ARC provides for a de minimis exemption if the turnover of one of the undertakings concerned (including its affiliates) did not exceed €10 million worldwide in the financial year preceding the transaction. In the case of the target, the turnover of the seller must be considered, provided that the seller controlled the target prior to the transaction. However, this exemption does not apply if the alternative thresholds (see question 2.6) are triggered.

If credit institutions, financial institutions or insurance undertakings acquire shares in another undertaking for the purpose of resale, this shall not be deemed to constitute a notifiable transaction, as long as the acquirer does not exercise the voting rights attached to the shares and resale occurs within one year. Upon application, this timeframe may be extended by the FCO.

Finally, German merger control law does not apply if the European Commission has exclusive jurisdiction under the EU Merger Regulation.

For more information about this answer please contact: Daniel Wiedmann from P+P Pollath + Partners