Private equity (transactions)—Germany—Q&A guide

The following Financial Services practice note provides comprehensive and up to date legal information covering:

  • Private equity (transactions)—Germany—Q&A guide
  • 1. What different types of private equity transactions occur in your jurisdiction? What structures are commonly used in private equity investments and acquisitions?
  • 2. What are the implications of corporate governance rules for private equity transactions? Are there any advantages to going private in leveraged buyout or similar transactions? What are the effects of corporate governance rules on companies that, following a private equity transaction, remain or later become public companies?
  • 3. What are some of the issues facing boards of directors of public companies considering entering into a going-private or other private equity transaction? What procedural safeguards, if any, may boards of directors of public companies use when considering such a transaction? What is the role of a special committee in such a transaction where senior management, members of the board or significant shareholders are participating or have an interest in the transaction?
  • 4. Are there heightened disclosure issues in connection with going-private transactions or other private equity transactions?
  • 5. What are the timing considerations for negotiating and completing a going-private or other private equity transaction?
  • 6. What rights do shareholders of a target have to dissent or object to a going-private transaction? How do acquirers address the risks associated with shareholder dissent?
  • 7. What notable purchase agreement provisions are specific to private equity transactions?
  • 8. How can management of the target company participate in a going-private transaction? What are the principal executive compensation issues? Are there timing considerations for when a private equity acquirer should discuss management participation following the completion of a going-private transaction?
  • 9. What are some of the basic tax issues involved in private equity transactions? Give details regarding the tax status of a target, deductibility of interest based on the form of financing and tax issues related to executive compensation. Can share acquisitions be classified as asset acquisitions for tax purposes?
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Private equity (transactions)—Germany—Q&A guide

This Practice Note contains a jurisdiction-specific Q&A guide to private equity (transactions) in Germany published as part of the Lexology Getting the Deal Through series by Law Business Research (published: February 2021).

Authors: POELLATH—Tim Kaufhold; Tobias Jäger

1. What different types of private equity transactions occur in your jurisdiction? What structures are commonly used in private equity investments and acquisitions?

Predominantly, private equity investors aim to acquire majority stakes in German companies. However, given the lack of target companies and the mounting pressure on market to invest, private equity investors are nevertheless more and more willing to acquire minority interests as well.

Leveraged buyout transactions dominate the private equity market in Germany. But we have seen an increasing number of transactions in which private equity acquirers fully fund their investments with equity and get debt financing at a second stage.

In most transactions, a private equity acquirer is willing to grant the management an equity portion in order to align interests with the management team. This management equity portion is in general, again, leveraged in comparison with the interest of the private equity acquirer.

Beside the acquisition of equity portions, we have also seen investment in other instruments such as profit participation rights or silent partnership interests. The private equity acquirer's willingness to enter into such investments depends on the particular case and strategy.

2. What are

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