The Art of Negotiation – A Global Review of the M&A Deal Process

Virtual Round Table Series M&A Working Group 2017

What is your ‘best practice’ approach to managing the contract process to ensure smooth deal completion?

On the subject of timeframes, we find the content of documents such as NDAs or LOIs is very important. There should always be clear timescales listed.

Are there any particularly important items, in your opinion, that are always the subject of intense negotiation between attorneys on either side of a deal?

I find due diligence tricky to negotiate, especially with a med-tech company or a firm with a lot of patents. When sensitive information is eventually disclosed to the buyer, break-up fees must be included. In the last two or three years this has become a big issue for me, since it affects everything about the purchase price.

What are the main deal breakers that no amount of intense negotiation can resolve?

Time can be a deal breaker in contract negotiations, particularly with Chinese counterparts. Their culture involves endless negotiation and it takes them a long time to make a decision. German sellers often decide to walk away from such deals because of the time factor.

How easy is it to complete an M&A transaction in your jurisdiction from a regulatory perspective?

In Germany the most important thing is anti-trust laws. When we find ourselves with an anti-trust issue the authorities are usually very quick to respond. It might take 3-6 weeks nationally and three months at an EU level. Just recently we had two or three anti-trust cases involving Chinese acquirers. In one case the US weren’t happy with the sale of the strategic German company, but normally any foreign company can buy any company, except weapons manufacturers, in Germany.

Are notaries an important part of the deal process in your jurisdiction?

The services of a notary public in Germany are quite expensive. We often go to our neighbours Switzerland where the same language is spoken, but the notaries are cheaper. It is not possible to do everything in Switzerland, so sometimes you do need a German notary public, but it’s very important to remember that, in Germany, any contract concerning shares or real estate without notarisation is void.

As an example, I once represented a German company that was buying an English company. They put the heads of terms, including the purchase price, on a serviette over dinner. The German buyer thought they needed to notarise everything, so assumed this wasn’t valid. It was hard to convince the English seller to reopen negotiations once they thought it was settled.

German notaries are also required to read everything out loud, which can take a while – the longest reading I was party to took 16 hours.