Laws and Regulation in German Business Merger and Acquisition

For the span of more than a decade, the overall regulatory framework of business merger and acquisition in Germany has been through various significant and prominent revision which have too placed from the year 1990 up to the early 2002. With the goal of creating and increasing a better precision and transparency in the market control of such process, there are four laws that have been passed under the supervision of various political interests and direction that is specifically designed for the encouragement of financial market.

In addition to this, the revised Restructuring Act has been done and made effective in the year 1995 that is mainly situated in reducing the higher transaction cost for the process of business combination and reformation. Another development took place when the Takeover Law has been achieve in the year 2002, which directly lay a definite legal structure for tender offers that is applicable for both local and foreign bidders for German publicly traded corporations. Business Combination and Germany’s Notification Requirement The process of business merger and acquisition in Germany also requires for the standard notification.

Hence, there is a standard procedure that The Federal Cartel Office must be notified accordingly with regard to the planned business combination. This means that all of the impending business merger and acquisition must undergo through the supervision of The Federal Cartel Office with direct German participation in a given instance that the participating enterprises have drawn corporate sales of more than €500 million for its recent fiscal year or in a situation where one of the direct concerned enterprises has recorded a total sales in Germany of about €25 million.

Hence, the regulatory framework of Germany in business merger and acquisition, more especially the participation of The Federal Cartel Office, depends on the amount and sales value that the concerned enterprises have. Through this requirement in regulating business combination in Germany, there are two specific immunities in attending through such notification process.

One the immunity can be achieved and rendered for business combination process when the merging and acquiring enterprise does not hold a relevant and legal division to another group of businesses and only has a minimal amount of global corporate sales that is lower than €10 million as for its newest corporate record of completed fiscal year. This is to ensure that the acquirer would not take advantage of the opportunity to practice greed investment in support of further strengthening its business dominance.

Another way through which this exception could be attained in establishing business combination only if the market for such acquisition holds at least five years tenure with more or less €15 million sales volume in the recent documented fiscal year. Through this provision, The Fedeal Cartel Office is given the necessary amount of time to undergo and implement the standard assessment procedure with regard to the notification of impending business merger and acquisition request.

In a span of a month, The Federal Cartel Office could do their version of study whether the proposed business combination could push through or could not be processed due to technicalities. For instance that the completed examination and evaluation done by The Federal Cartel Office does not conclude any legal disqualifications, the prior notified proposed business combination could already be processed and accomplished within the span of four months from the official date of notification.

Given the notion that review and assessment done by The Federal Cartel Office shows definite grounds for termination of the proposed business merger and acquisition, the intended business combination could on be denied when the transaction of combining enterprises would only produce an outcome that the concerned enterprises would further strengthen their advantage and dominance in the market.

However, if the strengthened and gained market majority of the merging enterprises would further increase the degree of competition in the business atmosphere rather than having a complete dominance against other business enterprises, the proposed business combination could still push through.

For instances that the prior proposed business merger and acquisition has already been denied and prohibited as per the conclusion and decision of The Federal Cartel Office, the participating enterprises could still imposed their of environment their appeal for reconsideration of their case by means of submitting a formal petition for further review of their case with the Federal Minister of Economics, which is a higher governing body in regulating business combination in Germany.

Through this procedure, the Federal Minister of Economics can alter the prior rendered disapproval to the proposed merging of enterprises and amend the decision done by The Federal Cartel Office say that denied business combination has a broad significance in Germany’s economic and public interest. Antitrust Supervision As for other legislation made through the years, the Antitrust Supervision serves as one of the significant factors that have direct influence to entire regulatory framework of business merger and acquisition in Germany.

Under this provision, it is said that all of the impending business merger and acquisition that entails quantifiable and considerable impact on the markets for goods and services would have to go through the passed German Antitrust Supervision without the consideration of concerned company’s place of origin and home country. Within this German Antitrust Act, there are four specific forms of transactions which the concerned enterprise or company could accordingly ascertain in undergoing the process of business merger and acquisition.

These types of transactions could also be considered as effective beyond its designated scope and in case to case basis. One way through which businesses could be combined is to determine whether the acquisition of assets would be whole or in partial terms by the merging enterprise to another. This means combination of two enterprises could be done through partial and complete acquisition depending on the terms of agreement between the two concerned companies.

Another way which business merger and acquisition could be done is through the conformity that measures the reach of direct or indirect control of the merging company in the overall business enterprise and/or just part of the entire business process. Thus, through this form of business merger and acquisition, the majority of influence and legal delivery of control in the joint business would be decided, and determines the reach of control or profits that would surrendered to another enterprise that have direct participation in the combination process.

Through the passed Stock Corporation Act, the changeover in overall business control could be achieved and approved with the provision that requires a minimum of 75 percent vote coming from all the shareholders of the concerned companies. As for the third type of transaction, the business merger and acquisition could also be done through which an enterprise could raise and strengthen its equity interest in another business with about 25 to 50 percent about the normal threshold. Through this form of business combination, all of the concerned enterprise can make their own way to offer their interest in merging and acquiring the said enterprise.

Lastly, the fourth way of establishing a business combination could be done by enabling an enterprise to implement considerable influence over another enterprise. Securities Trading Act It is only recently, in the year 1994, that Germany has instituted a legal policy regarding the securities law that governs trading in such especially with mergers and acquisitions. In the country, the practices that are posited to involve insider trading has become a criminal offense and are likewise regulated under the securities statute of the country.

In line with the Securities Trading Act, the behaviors of the institutions that are dealing with financial securities are also regulated through a code issued which is especially noted for ad hoc dissemination of information or insider trading. For the former, all of the information that arrives should be accessible to all parties concerned especially if this would have a significant impact in terms of the prices of the securities in order to give everyone the chance to trade competitively and avoid giving others an advantage at the expense of others.

However, this is not applicable on the situation where the approval of the supervisory board is yet to be achieved. There is also a more detailed scenario given in the FWB Rules and Regulations of Deutsche Borse AG that could be used to govern disclosure information for those areas or specific situations which are not covered by the Securities Trading Act. The Takeover Act In the year 2002, the German Takeover Act has been officially passed, which has directly regarded the prior Takeover Code no longer effective in the process of business combination.

In a sense, this new Takeover Act renders two significant ways in establishing the business merger and acquisition. This act render control and regulation enterprises with about 30 percent of the votes in equity interest and provide the equal stance of management in process of takeover. In addition to this, this new Takeover Act also openly allows the concerned enterprises to have their own defensive measures. Nonetheless, this new passed German Takeover Act has already been established to be a glowing functioning governing body of law in the process of public takeovers.

With provided sufficient opportunity to move on with the with necessary and accurate rules, all of the concerned enterprises, directors and managers, target corporations and regulators have all located a sturdy grounds and reasons to confidently pursue and enact business mergers and acquisitions in Germany. Germany and United States Business Combination Act In the USA, there is a far more critical role played by laws and regulations in terms of the mergers and acquisitions that has happened in the country.

There are federal and state laws that have been put in place in order to make mergers and acquisitions a regulated activity in the private arena. There are three primary laws that regulate the mergers and acquisitions in the said country. Laws meant for this purpose include securities law, antitrust laws, and state corporation laws (Gaughan 7). Through time, there have been different laws passed under each of the three broad categories that are meant to refine the provisions as there are changes that are needed.

Under securities law, the two landmark laws that have been created are the Securities Act of 1933 and the Securities Exchange Act of 1934 as these laws required registration of publicly-traded securities, for the former, and established the federal enforcement agency that implemented security legal statutes at the federal level (Gaughan 7). As for the antitrust, there are also several laws that have been passed in order for the regulations to be continuously enhanced to address the concerns of anti-trust activities of the companies that reduce the competition in the market as it intends to dominate the greater segment of the company.

The first anti-trust law that has been submitted is in the 1980s as a response to the growing number of companies undergoing mergers and acquisitions in order to enhance their dominance in the market (Shenefield & Stelzer 57). In line with these, the corporations have also been required to inform the respective agencies when they decide to enter a merger or acquisition in order for government approval to be given and for authorities to easily identify whether anti-trust statutes have been violated (Shenefield & Stelzer 57).

Lastly, the state corporation laws are the laws that can be found implemented in the states that have significant impact on the corporations established or operating in the specific state. There are different impacts of these laws depending on the different states as they have the capacity to make their own regulations based on their own experiences and nature of business requirements in their area. Moreover, there is special attention given to hostile takeovers as found in the laws of the US when it comes to mergers and acquisitions.

The companies which are most likely to become the targets of hostile takeovers are those where the developments in terms of price can not exactly convince their shareholders (Picot 98). In comparing this with the German laws and regulations regarding takeover, there is a rather distinct characteristic pointed out where German laws are not governed by federal and state laws, which is the case for the USA laws. There is a different scheme that is followed according to the structure of the German government.

However, there are similarities that can be found where there are anti-trust laws, securities law, and statutes provided regarding hostile takeover. The goals of the two countries are the same when it comes to addressing the interests of certain companies to dominate a particular market and reduce the competition within it. The German and US regulatory framework has the core purpose of preventing this and enhancing the competition within each market. More so, there is a requirement for transparency embodied in the different laws and regulations required by each country for corporations.

When two companies decide to enter an agreement of merger or acquisitions, there is always the demand from the government, or its agents, to provide relevant information and to enhance the flow of information from one end to another with the purpose of reducing business failures and fraudulent acts in several ways. The similar nature of the German and US laws that govern mergers and acquisitions show the similarities in terms of the nature of the partnerships that are formed between corporations in these countries.

It remains that these corporations, despite being divided by geographical boundaries, operate on the same possibilities and theories that have been established over a long period of time in the field of finance and economics. The experiences of both countries have also been the same in terms of the hostile takeover. The history of such occurrence can be seen from the positive end as there are no controversial or big hostile takeover that has happened in the history of mergers and acquisitions in both countries.

Either the countries have established their selves to be strong Works Cited Gaughan, Patrick. Mergers: What Can Go Wrong and How to Prevent it. Danvers, MA: John Wiley & Sons, Inc, 2005. Kann, Jurgen and Wledemann, Karen and Just, Clemens. German Securities Trading Law – New Share Ownership Notification Rules. Last Updated March 2007. German Law Journal. 16 April 2009 <http://www. germanlawjournal. com/article. php? id=804> Picot, Gerhard.

Handbook of international mergers and acquisitions: Preparation, implementation, and integration. New York, NY: Palgrave McMillan, 2002. Schmid, Frank and Wahrenberg, Mark. Mergers and Acquisitions in Germany – Social Setting and Regulatory Framework. Last Updated September 2003. Social Science Electronic Publishing, Inc. 16 April 2009 <http://papers. ssrn. com/sol3/papers. cfm? abstract_id=460800> Shenefield, John. & Stelzer, Irwin. The antitrust laws: A primer. Washington, DC: American Enterprise Institute, 2001.