M&A transactions were heading for a record high in Germany last year. German firms were a popular target among foreign investors interested in corporate takeovers.

Probably due in no small part to the rising number of company takeovers from investors based outside of the EU area, Germany’s federal government wants to take a closer look at these kinds of transactions, with the ninth regulation amending the Außenwirtschaftsverordnung, Germany’s Foreign Trade and Payments Ordinance, even granting the government a right of veto.

We at the commercial law firm GRP Rainer Rechtsanwälte note that it was already the case that instances of investors from outside of the European Union or EFTA acquiring at least a 25 per cent share in a German company could be investigated by the Bundeswirtschaftsministerium, Germany’s Federal Ministry for Economic Affairs. However, the amendment to the Außenwirtschaftsverordnung means that the auditing periods have now largely been extended from two to four months and even so-called indirect acquisitions will be accounted for in the audit. It therefore also concerns transactions in relation to which the investor initially established a company within the EU and this then acquires a share in a German company or wishes to take it over.

According to the Bundeswirtschaftsministerium, the more rigorous auditing criteria are supposed to be a response to the increasing number and complexity of corporate takeovers and sales.

These audits essentially concern takeovers in areas that are particularly relevant from a security perspective and affect the federal government’s security interests. This relates, for instance, to the armament industry, but also civilian security-relevant technologies. Special attention ought to be paid here to businesses in the fields of information technology, telecommunications, cloud computing, energy and water, health, transport as well as finance and insurance.

The Regulation also introduces a reporting obligation for acquisitions of German companies planned by investors from outside of the EU in civilian economic sectors that are particularly relevant from a security perspective.

The amendment to the Außenwirtschaftsverordnung might make it more difficult for foreign investors to acquire a German company and also take more time. That being said, there need to be substantial grounds to prevent a corporate transaction from taking place.

Investors and entrepreneurs who are interested in a purchase or sale can consult lawyers who are experienced in the field of M&A.

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