Distressed Mergers and Acquisitions in Germany
Published on 26th Mar 2020
The acquisition of a company in distress provides for special opportunities, but also contains special risks. Osborne Clarke is happy to be your trusted advisor to guide you through these risks and highlight opportunities from a legal point of view.
In general, the sale and acquisition of companies in distress follow the same rules applicable in any other deal. However, certain distress-specific aspects have to be taken into consideration.
As in other transactions, the acquisition of a company in distress can take place by way of an asset deal (and liquidation of company) or a share deal (and restructuring of company). The typical pros and cons generally also apply in case the company is in distress. Please contact us for more details.
B. Asset Deal
The below chart provides a high-level overview of the main two stages of acquisition in case of an asset deal.
|Company in liquidity crisis||Company in insolvency|
|Time of acquisition||
|Insolvency specific risks||
C. Share Deal
Any acquisition of a company in distress is subject to increased time pressure. Given liabilities can be left behind and a “black box” can be avoided, investors often prefer an asset deal.
However, if at least certain contractual relationships of the company are key or if the investor seeks to gain control over the company to avoid an insolvency, a share deal may be the preferred option of the investor. Other as in an asset deal, no consent of the contractual party is required and control is obtained by stepping in as shareholder.
If the company in distress is already insolvent, the following main aspects have to be taken into account:
- The contractual relationships cannot be terminated by contracting party even if such contract provides for a change-of-control clause
- The sale and the restructuring of the distressed company regularly take place as part of an insolvency plan
- An acquisition within an insolvency plan will generally be more time consuming and involve higher costs
- The terms of an insolvency plan have to be approved by thereby impacted creditors and confirmed by the insolvency court