The acquisition of distressed German companies in crisis and insolvency harbors both opportunities and risks for the buyer. The acquisition of a company in crisis and insolvency can represent an opportunity for the buyer to make a favorable acquisition. At the same time, however, such an acquisition can also be associated with major liability risks.

Is there a preferred transaction structure for distressed M&A in Germany?

For the acquisition of companies in crisis or insolvency (“Distressed M&A”), the asset deal is usually the preferred form of transaction for the buyer compared to the share deal. An important advantage over a share deal, especially in crisis situations, is that an asset deal does not require the acquisition of the company as a whole. By acquiring the company as a whole, you would not only be acquiring potentially unprofitable areas, but also the liabilities and liability risks associated with the company. With an asset deal, on the other hand, you can engage in targeted “cherry picking” and ideally only acquire the valuable assets or businesses or parts of businesses.

However, the asset deal is not without risk either. It is important to avoid asset deal-specific liability and cost traps, particularly from an environmental, labor, tax and commercial law perspective, or at least to factor them into the purchase price valuation. One possible disadvantage compared to a share deal is that the acquirer bears the risk that not all employees will be transferred and that contracts with third parties must be transferred separately by way of contract transfer.

^********

Disclaimer:

This article should not be construed as legal, financial, or business advice. The information does not represent the views of smarti. Neither smarti nor its guest contributors assume liability for the accuracy, comprehensiveness, or timeliness of the information provided. We strongly recommend seeking professional advice before making business decisions.