concentrate power on the managing directors and
install a weaker second management level; founders are
so confident in their competence that they neglect to
share power. So when taking over a business, it is often
necessary to arrange for a new management.
Foreign investors will not be used to the facts and
figures they will get so see in the data room. German
GAAP produces different data than for example the US
GAAP. In order to evaluate that data reasonably, a law
firm with expertise in German GAAP has to be entrusted
with the task of analyzing the given data.
TO WHAT EXTENT IS LOCAL KNOWLEDGE ESSENTIAL WHEN
HANDLING A TRANSACTION IN THIS FIELD?
There are behaviours and actions that are essential to
the process of buying a Mittelstand company, and
equally there are behaviours and actions that need to
be avoided in order to successfully close a deal in this
Firstly, special care has to be taken with respect to
the seller. As described earlier, these owners might
have their own thoughts and ideas about their company
and its transfer into new hands.
This is especially important when dealing with
smaller companies that are run by an owner who is an
expert on his field, for example engineering, but who is
not overly experienced in economic affairs. It might be
well-advised not to intrude on that small company with
a large number of lawyers in dark suits trying to
implement a due diligence. An alternative might be to
Only an independent German
law firm that is experienced in
both worlds, global M&A as well
as the regional German
Mittelstand, can be the ideal
partner for a foreign investor that
is interested in gaining a part of
the successful economic story
that is the Mittelstand.
install a virtual data room or meet outside of the
company’s premises on neutral terrain.
The most fundamental issue for a significant number
of these sellers is confidentiality. After having sold the
company, they still want to be able to walk around their
town and have people look at them with respect and
approval for their achievements.
after having sold their company,
sellers sometimes want to install
articles in the contract that may
seem extraordinary at first glance.
Such articles could be job
guarantees for the current
employees that might well be the
seller’s next door neighbours!
Some sellers also want to know
that their relatives will be taken
care of and may insist on articles
that guarantee the further
employment of family members.
Also, sellers of the German Mittelstand often want to
terminate their involvement in the company with
completion of the purchase contract in order to
completely finish off a chapter of their life. Therefore
financing out, and similar articles, are not very popular
amongst those sellers. This means that other measures
have to be taken if an investor wants to buy a company
in Germany and does not yet have the necessary
In essence, the foibles and sensibilities of this
particular branch of the German corporate scene often
seem peculiar and plenty. Only an independent German
law firm that is experienced in both worlds, global M&A
as well as the regional German Mittelstand, can be the
ideal partner for a foreign investor that is interested in
gaining a part of the successful economic story that is
the Mittelstand. ■
Dr. Thomas Gemmeke is a corporate partner in the
Munich office of RölfsPartner. He regularly advises
major international investors on their acquisitions and
divestments in Germany. Thomas is also very familar
with the pecularities of German Mittelstand companies
and co-heads the working group "company succession"
with the German Federal M&A Association.
Dr. Thomas Gemmeke
Tel.: + 49 (0) 89-5 50 66-390
Fax: + 49 (0) 89-5 50 66-100
Nymphenburger Straße 3b