Why is selling companies to foreigners in Germany so popular?
Germany offers an attractive ecosystem for foreign investors in terms of mergers and acquisitions (M&A) due to its strong domestic market, access to the EU single market, and corporate governance culture. Moreover, as a general rule, there is no general prohibition on foreigners acquiring shares in domestic companies under German corporate law. This makes the process accessible for investors planning to fully acquire or become partners in a company operating in Germany.
However, the phrase “there is generally no restriction” does not mean that every transaction will automatically close smoothly. The structure of the acquisition (whether shares or assets), the legal form of the target company (GmbH, AG, etc.), notary requirements, tax implications, existing contractual obligations, and especially the potential for foreign investment review for investors from outside the EU/EFTA can determine the fate of the process.
Need and risk: A poorly structured transaction can lead to acquiring not just the company but also its liabilities
Typical motivations for investors wishing to acquire a company in Germany include rapid market entry, an existing customer portfolio, acquisition of licenses/know-how, and growth with an established team. In contrast, the most critical risk is that if you do not structure the transaction properly, you may face unexpected costs due to hidden debts, ongoing lawsuits, tax risks, or “change of control” clauses in contracts.
Therefore, two key issues stand out in the processes of selling/buying companies to foreigners in Germany: the depth of due diligence and the protection mechanisms in the purchase agreement (SPA/APA).
Main types of companies in Germany: Which structure is more “acquirable”?
The structures that foreign investors most frequently encounter and acquire in Germany are as follows. The type of target company affects many areas, from notary procedures to liability regimes:
- GmbH (Limited Liability Company): This is the most common form. The minimum capital is €25,000. Share transfers are typically conducted through this structure.
- AG (Public Limited Company): This is a larger and more complex structure. The minimum capital is €50,000. In publicly traded structures, public disclosure and acquisition rules become critical.
- UG (Entrepreneurial Company): For startup companies; it can be established with a low capital of €1. However, the perception of financial resilience, banking relationships, and supplier limits may require additional analysis before acquisition.
- GmbH & Co. KG: A hybrid model that combines limited liability with partnership flexibility. It can be advantageous if well planned in terms of tax and management structure.
Acquisition process: Typical M&A roadmap in Germany
The sale of a company or the acquisition of a company by a foreign investor in Germany typically proceeds with the following steps. The good news: The process is standard. The challenging part: Each step has its own documentation, timeline, and negotiation dynamics.
1) Market research and target identification
First, the target sector, city, revenue range, profitability, regulatory sensitivity (e.g., strategic areas like defense, crypto, satellite technologies), and your reasons for acquisition become clear. At this stage, the question “What structure am I acquiring: shares or assets?” also comes to the table.
2) Initial contact and confidentiality agreement (NDA)
After the first contact with the seller, a confidentiality agreement is made for information sharing. Since data and trade secret discipline is taken seriously in Germany, the scope of the NDA and information access limits are well defined.
3) Preliminary valuation and offer
A preliminary valuation is prepared based on financial data, customer concentration, contract durations, team structure, and growth assumptions; a non-binding offer (LoI/Term Sheet) is formulated.
4) Due diligence (legal, financial, operational, technical)
Due diligence is a critical step for the “clean” closing of the transaction in Germany. Typical scope:
- Legal review: Company contracts, lawsuits/disputes, lease and supply agreements, licenses, compliance with KVKK/GDPR, intellectual property.
- Financial review: Quality of income, working capital, indebtedness, cash flow, off-balance sheet liabilities.
- Tax review: Past tax risks, transfer pricing, VAT risks, payroll-related risks.
- Operational/technical review: Production capacity, IT infrastructure, information security, critical personnel dependency.
5) Negotiation of the purchase agreement
The contract is where the risk-sharing is written down. In German practice, representations and warranties, indemnification regime, closing conditions (conditions precedent), price adjustment mechanisms (net debt/working capital), non-compete and management transfer provisions are particularly important.
6) Closing and transfer of ownership
Especially in the case of GmbH share transfers, notary approval is mandatory. After closing, the new shareholder list must be submitted to the Commercial Register. This step is critical for clarifying ownership in relation to third parties.
7) Post-merger integration
The value of the acquisition is often created through integration. In German business culture, process management, written communication, clear role definitions, and stakeholder management (including employee representation mechanisms) stand out. The integration plan should cover financial-accounting, payroll, ERP, sales, and human resources alignment.
Share sale or asset sale? (Share Deal vs Asset Deal)
The most common structure in Germany is the share transfer (share deal) model, which typically proceeds through the sale of GmbH shares. Alternatively, an asset transfer (asset deal) can be made. The choice determines not the price, but often the risk and tax profile.
When is a share sale (Share Deal) advantageous?
- If the company’s contracts, licenses, and customer relationships continue seamlessly within the “corporate entity”
- If operational continuity is critical (if the transfer of permits/licenses is difficult)
- If a comprehensive representation-warranty and indemnification mechanism can be established with the seller
Risk: In a share transfer, the company’s past liabilities remain with the company; you indirectly inherit these risks as well. Therefore, due diligence and contractual protection are essential.
When is an asset sale (Asset Deal) advantageous?
- If you want to acquire specific assets (brand, equipment, customer contracts, etc.)
- If you want to limit the risk of past debts and disputes more narrowly
- If you are acquiring a business unit rather than the entire company
Risk: Contract transfers, employee transitions, permit/license transfers, and items like VAT/fees may create more operational work.
Legal framework: Which areas of legislation are decisive?
M&A transactions in Germany are conducted within a multi-layered legal framework. In practice, the following fundamental regulations play a “roof” role:
- Commercial Code (Handelsgesetzbuch – HGB)
- Civil Code (Bürgerliches Gesetzbuch – BGB)
- Limited Liability Company Act (GmbHG)
- Stock Corporation Act (Aktiengesetz – AktG)
Notary requirement in GmbH share transfers
In the sale of GmbH shares, notary certification of the purchase agreement is mandatory. After closing, the new shareholder list is submitted to the Commercial Register. This detail is a critical “hard stop” point in terms of timing and closing checklist.
30% threshold and mandatory offer agenda in public companies
If the target structure is a public company (AG, etc.), the intention of control and share ratio becomes important after acquisition. Under the German Securities Acquisition and Takeover Act, if more than 30% of shares are acquired post-acquisition, a public offer obligation may arise. In public transactions, timing, disclosure obligations, and price rules are also addressed.
Foreign investment control: What do investors from outside the EU/EFTA need to know?
Although the general principle is that there are no restrictions on foreigners, Germany can review foreign investments in certain situations. Especially if the acquirer is coming from outside the EU or EFTA and wants to reach 25% or more of voting rights in a German target company, it may fall under the review of the Federal Ministry for Economic Affairs and Climate Action (referred to as FMEC in research data).
In this context, two practical issues stand out:
- There is no general prohibition in corporate law; however, the company’s own articles may contain specific restrictions regarding share transfers.
- Although automatic notification is not required for every transaction, investors may practically consider requesting a no-objection certificate from the relevant authority for “legal certainty”.
Increased likelihood of review in strategic/sensitive sectors
In areas such as arms manufacturing, companies with critical capabilities in military production, crypto system manufacturers, or operators of high-grade satellite systems, restrictions and review intensity may increase. If an official review procedure is initiated, the investor is obliged to submit the relevant documents; at the end of the process, the acquisition may be restricted or prohibited within four months. This possibility requires the correct drafting of closing conditions (conditions precedent) in the SPA.
Financing options: How is the acquisition financed?
Various financing combinations are used in company acquisitions in Germany. The most common options include:
- Bank loans
- Seller financing (spreading part of the price over time)
- Private equity investment
- Mezzanine (hybrid financing between equity/debt)
- Government funds and subsidies (depending on eligibility criteria)
The financing structure directly affects not only the collateral structure and cash flow projections but also the acquisition model (shares/assets), tax optimization, and closing timeline.
Tax and compliance dimension: You acquire not just the price, but also the “post-transaction order”
As highlighted in the research data, choosing between share sale and asset sale creates significant differences in terms of tax implications and liabilities. Therefore, the following topics need to be clarified before the acquisition:
- Transaction structure: Is it a share deal or an asset deal? Will it be acquired through a holding?
- Tax risk map: Past tax audits, VAT position, transfer pricing, payroll obligations.
- Workforce and payroll: Payroll processes, social security obligations, fringe benefits, collective labor agreements/employee representation mechanisms.
- Cross-border structure: Reporting and accounting compliance in foreign parent-holding structures.
Early planning in these areas significantly reduces “surprise costs” after closing.
Professional consulting: An element that manages risk, not just accelerates the process in Germany
Successfully completing a company acquisition in Germany typically requires a multidisciplinary team:
- M&A consultants: Target search, process management, negotiation coordination.
- Legal advisors: Legal due diligence, SPA/APA drafting, notary process, and closing documentation.
- Tax advisors: Optimize the transaction structure, incorporate tax risks into pricing/mechanism.
- Industry experts: Valuation assumptions, market realities, and operational risks.
Among the success factors for foreign investors, local and cultural expertise, building relationships with sellers and stakeholders, long-term commitment, and a detailed integration plan stand out. In German business culture, clarity, consistency, and written process management directly affect the quality of negotiations.
Where does Corpenza position itself in this process?
A company acquisition is not solely a legal/financial transaction; often, the right structuring is needed in areas like corporate structuring, accounting, payroll, employment, and cross-border team management during the “post-acquisition” period. Corpenza creates value precisely at this point in terms of “post-transaction sustainability”.
- International corporate structuring and organization: Group structure, subsidiary arrangement, and operational setup post-acquisition.
- International accounting and reporting: Regular closing, management reports, and compliance processes.
- Payroll and EOR solutions: Models aimed at reducing the operational burden of employee employment in Germany or multi-country structures.
- Mobility and residency permit perspective: Ensuring that immigration planning aligns with the business plan in executive/expert appointments post-acquisition.
- Personnel leasing with posted worker model: Flexible employment structures considering tax/compliance balance in project-based field setups (in suitable scenarios).
In summary, Corpenza offers a comprehensive framework not only for the part of the acquisition process “up to closing” but also for ensuring the healthy operation of post-closing operations and managing compliance risks. This approach preserves the value of investment, especially in markets like Germany, where regulatory discipline is high.
Conclusion: Acquiring a company in Germany is possible; it becomes secure with the right structuring
Generally, it is possible for foreigners to acquire companies in Germany, and the market has many investor-friendly tools. Nevertheless, critical thresholds such as foreign investment control in strategic sectors, notary requirements in GmbH transfers, and the 30% threshold in public companies require “transaction engineering”. The question of whether to proceed with a share transfer or an asset transfer is not just a technical preference; it is fundamental to tax, liability, and integration strategy.
The key to success is strong due diligence, the correct contractual structure, and well-planned post-closing accounting-payroll-human resources arrangements. When you establish this integrity, an acquisition in Germany becomes not just a growth move but a sustainable European scaling strategy.
Disclaimer
This content is prepared for general informational purposes only; it does not constitute legal, tax, or financial advice. Legislation and practices may change over time; the current regulations and practices of official authorities should also be evaluated for specific transactions. We recommend seeking support from qualified legal, tax, and financial professionals before making decisions in high-impact transactions such as company sales/acquisitions in Germany.
