The landmark Vodafone / Mannesmann takeover in 1999 / 2000 demonstrated the need for a comprehensive statutory regime for public takeovers of German companies. The German Takeover Act (Wertpapiererwerbs- und Übernahmegesetz – WpÜG) introduced such a regime and came into force in 2002. It applies to all offers for German issuers whose shares are admitted to trading on an organized market in Germany or within the European Economic Area (EEA), e.g. the Prime Standard and the General Standard markets of the Frankfurt Stock Exchange. The Takeover Act established the general principles for the conduct of takeovers in Germany, the first and most important of which is the requirement that all shareholders must be treated equally, and regulates the offer procedures.
Compliance with the Takeover Act is overseen by the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin), which has supervised over 400 public offers with typically between 16 and 26 offers per year. While the transaction volume usually ranges between EUR 10 and 100 million, only one in ten transactions is over a billion euros.
The German market for public takeovers has to cope with continuous legal and factual change. As a result of changes in European legislation, the relevant German statutes have undergone and continue to experience substantial amendments, in particular to increase transparency and to implement a more onerous sanctions regime.
In recent years, foreign investors have increased their takeover activity in Germany. The takeover approach by Canadian Potash Corp. for K+S, which was advised by CMS, was the most notable and the first attempt by a foreign buyer to take over a German DAX listed company for a while, though it was successfully repelled. The intended but unsuccessful “merger of equals“ of London Stock Exchange and Deutsche Börse, was ultimately also structured as a takeover by a (new) UK holding company.
The increasing trend of shareholder activism has increased the complexity of public takeover transactions. Activists like Elliott acquire substantial stakes following the announcement of a takeover and try to drive up the offer price (e.g. McKesson / Celesio or DMG MORI). Other activists aim at forcing a change in the management of the target company (e.g. Bain and Cinven / Stada).
In this challenging environment, careful consideration of the strategic options is essential. This guide provides an introduction to the legal framework which governs public takeover offers in Germany and gives an insight into how such takeover offers are conducted in practice.