Healthcare M&A 2026 Comparisons

Market Overview and Deal Activity

The German healthcare M&A market remained active in 2024 and into 2025, with 237 transactions recorded in 2024 – broadly in line with the prior year’s 234 deals – despite persistent structural headwinds including cost pressure, staff shortages, the impact of hospital reform legislation, fragmentation of outpatient care, and a significant digital transformation backlog. The first quarter of 2025 saw deal activity negatively affected by uncertainty surrounding the federal elections, the coming into effect of the Hospital Care Improvement Act (Krankenhausversorgungsverbesserungsgesetz – KHVVG), and global financial market volatility arising from geopolitical tensions and trade disputes.

The landmark German deal of 2025 was the STADA transaction. In September 2025, CapVest Partners signed a definitive agreement with Bain Capital and Cinven to acquire the majority stake in STADA Arzneimittel AG – a leading European pharmaceutical company specialising in consumer healthcare, generics and specialty pharmaceuticals, headquartered in Bad Vilbel, Germany. At a reported value of approximately USD11.75 billion, the deal illustrates sustained investor appetite for defensible assets with stable demand profiles – essential medicines and consumer healthcare products with limited reimbursement exposure.

German Versus Global Market

Globally, healthcare private equity delivered a record performance in 2025, with disclosed deal value exceeding an estimated USD191 billion – surpassing the previous high set in 2021 – and deal volume reaching its second-best year on record.

Against this backdrop, Germany is performing broadly in line with – but not ahead of – the global recovery. Germany-specific drags – KHVVG implementation uncertainty, post-election coalition formation delays and trade tariff volatility – have tempered the rebound. Within the European context, Germany nonetheless remains one of the largest and most strategically significant healthcare M&A markets, attracting cross-border inbound interest particularly in pharma, medtech and digital health.

• Pharma/biotech – robust, driven by patent cliff dynamics, pipeline M&A and generics consolidation (STADA being the flagship example).
• Digital health/healthcare IT – strong, with AI-supported diagnostics, ePA-adjacent platforms, and hospital IT solutions attracting both strategic and financial buyers.
• Rehabilitation/physiotherapy/outpatient specialties – active consolidation, particularly PE buy-and-build strategies in fragmented markets.
• Inpatient hospital – distress-driven, with volume up but investor appetite constrained by regulatory uncertainty.

Outlook

The outlook for 2026 is cautiously constructive. As more financial investors approach the end of holding periods, a steady pipeline of divestitures and secondary transactions is expected, with assets offering strengthened operational narratives and more explicit technology roadmaps – giving buyers greater confidence in evaluating exit options.

Hospital Sector: Restructuring, Insolvencies and Re-municipalisation

The inpatient hospital sector continues to be shaped by financial distress, restructurings and insolvencies. Notably, municipalities and district authorities have increasingly emerged as acquirers of insolvent hospitals, while private equity investors have remained largely absent from this segment. The trend towards re-municipalisation of healthcare facilities is clearly identifiable, though questions remain as to the long-term operational viability of publicly run institutions.

Digital Health and Healthcare IT: Strong Investor Interest

The market for digital healthcare providers continued to attract strong investor interest. AI-supported diagnostics, digital therapy platforms and hospital process optimisation solutions have been identified as particularly attractive targets.

MedTech: Consolidation Driven by MDR and Platform Strategies

Germany benefits from a strong base of family-owned MedTech companies and an attractive environment for private equity investors. Particularly sought-after targets include medical devices, medtech contract manufacturing (CDMOs), and specialised medtech services and distribution. A key driver of consolidation is the EU Medical Devices Regulation (MDR), which has increased regulatory compliance burdens and is accelerating market consolidation among smaller players.

Regulatory Framework as a Transaction Consideration

Further regulatory reforms aimed at accelerating digitalisation of the German healthcare system – including the mandatory electronic prescription roll-out extended to digital health applications and narcotics in 2025, and the nationwide roll-out of the electronic patient record (elektronische Patientenakte – ePA) from April 2025 – are expected to create new M&A opportunities in personalised medicine and innovative therapies, while simultaneously adding complexity to regulatory due diligence.

Place of Incorporation

Healthcare start-ups operating in the German market are typically incorporated in Germany.

Regulatory Considerations

There is no general healthcare rule requiring every start-up active in Germany to use a German company. However, regulated healthcare business models often require a structure that can hold German or EU/EEA regulatory authorisations, demonstrate local organisational substance and interact with German authorities – particularly where the business involves medicinal products, medical devices, pharmacies, healthcare providers or reimbursement-related activities.

Medical care centres (Medizinische Versorgungszentren – MVZ) may not be incorporated as stock corporations (AGs) and are subject to specific rules on eligible founders and permitted legal forms, with financial investors being excluded from directly acquiring or establishing MVZs. For investor-backed structures, this makes the acquisition of an eligible plan hospital as a “transaction vehicle” necessary, although this structure is under increasing legal and political scrutiny.

Incorporation Process and Timing

Founders may either incorporate a new entity or acquire a pre-existing shelf company (Vorratsgesellschaft) from specialised service providers. Shelf companies – typically structured as a GmbH – have no prior business operations and can be acquired for approximately EUR3,500 to EUR4,000 (plus the nominal share capital amount). Acquiring a shelf company allows for a significantly accelerated timeline of approximately two business days, whereas incorporating a new company generally requires five to ten business days, depending on the processing speed of the competent commercial register (Handelsregister) and the availability of a corporate bank account.

Capital Requirements

The applicable minimum capital requirement depends on the chosen corporate form. The GmbH, the most commonly selected vehicle for healthcare start-ups, requires a minimum registered share capital of EUR25,000. At the time of registration, at least 25% of each individual share and no less than 50% of the aggregate share capital must be paid in. Where a shelf company is acquired, the full share capital will already have been paid in and must be reimbursed to the provider on a euro-for-euro basis. Should founders opt for an AG, the minimum share capital is EUR50,000. Alternatively, the entrepreneurial company (Unternehmergesellschaft (haftungsbeschränkt) – UG), a simplified variant of the GmbH, may be established with a share capital as low as EUR1, though it is subject to mandatory profit retention requirements until the share capital reaches EUR25,000.

Healthcare entrepreneurs in Germany are predominantly advised to incorporate as a GmbH. The GmbH offers considerable flexibility in structuring corporate governance arrangements – particularly when compared with the more rigid framework governing stock corporations (AG) – and can be tailored to accommodate the specific requirements of the founders and their investors. The UG, while available as a lower-cost alternative, continues to carry a certain reputational stigma due to its minimal capital requirements, which may be a disadvantage when engaging with institutional investors, pharmaceutical partners or regulatory bodies.

It remains to be seen whether the proposed European Inc (also referred to as the “28th regime”), which is designed to enable swift cross-border online incorporation under harmonised requirements across the European Union, will gain traction in the healthcare sector once implemented. For healthcare companies with pan-European ambitions, such a vehicle could potentially simplify cross-border operations and regulatory engagement.

Sources of Early-Stage Financing

Early-stage financing for healthcare start-ups in Germany is sourced from a diverse range of investors. Business angels with sector expertise, specialised seed funds, university-linked technology transfer structures, corporate venture investors and family offices all play significant roles. Publicly sponsored programmes are also important, especially for research-based and capital-intensive business models. The High-Tech Gründerfonds (HTGF), backed by the German federal government and private investors, is a prominent pre-seed and seed investor active in life sciences and health technology. In addition, federal and state-level grant programmes support healthcare innovation, while KfW Capital strengthens the venture capital market primarily by investing in venture capital funds.

Documentation

Equity seed investments are typically documented through a term sheet, an investment and shareholders’ agreement, a shareholders’ resolution on the capital increase and amended articles of association. In a German GmbH, the capital increase and amended articles require notarisation and registration with the commercial register. Convertible loan arrangements (Wandeldarlehen) are also common, especially where the parties wish to defer valuation discussions to a later financing round. Public grants and subsidies follow a different documentation route and are usually based on grant decisions, funding conditions and project-related reporting obligations.

The German venture capital market for healthcare has grown considerably in recent years, though it remains less mature than its US counterpart in terms of deal volume and average ticket sizes. Key sources of venture capital for healthcare companies include dedicated life sciences and health-tech VC funds, corporate venture capital arms of major pharmaceutical and medtech companies, as well as government-backed vehicles such as the European Investment Fund (EIF). International VC firms – including US-based healthcare specialists – are increasingly active in the German market, often participating in Series A and later-stage rounds. The availability of domestic venture capital has improved, though larger financing rounds frequently require the involvement of international co-investors.

While established VC investors typically employ their own standardised documentation for seed and later-stage investments, Germany does not have a universally adopted set of model documents – unlike, for example, the British Venture Capital Association (BVCA) standard documents in the United Kingdom or the NVCA model documents in the United States. In practice, the German Standards Setting Institute (Deutsches Standardisierungsinstitut – GESSI) and certain industry associations have published template term sheets and investment agreements, but their adoption remains limited. Healthcare-specific investment documentation often includes additional provisions addressing regulatory milestones, clinical trial progress and intellectual property ownership – reflecting the sector’s particular risk profile.

The majority of healthcare companies remain incorporated as a GmbH throughout their development, as this corporate form provides greater operational flexibility and is less costly to administer compared with an AG or SE. However, a conversion to an AG or SE becomes necessary where a company seeks access to public capital markets – a step particularly relevant for healthcare companies requiring substantial capital for clinical development, regulatory approvals or commercial scale-up. Such conversions are effected under the German Transformation Act (Umwandlungsgesetz – UmwG), either by way of a change of legal form (Formwechsel) or a merger into an AG or SE shell.

Given the stability and predictability of the German legal system, healthcare companies generally do not migrate out of Germany for corporate law reasons. Where relocations do occur, they are typically motivated by tax considerations, proximity to specific capital markets (such as Euronext Amsterdam or the London Stock Exchange for life sciences companies), or a desire to establish a holding structure in a jurisdiction perceived as more favourable for international investors, which typically comprise establishing holding structures in the Netherlands or Ireland ahead of contemplated IPOs or cross-border mergers.

Investors seeking a liquidity event for a healthcare portfolio company in Germany will in most cases pursue a private sale process rather than an IPO. While IPOs remain an attractive exit route – particularly for biotech and medtech companies with strong growth narratives – they require significantly more preparation time, entail substantially higher costs, and are subject to execution risks arising from market volatility and complex listing requirements. The German IPO market for healthcare companies has been subdued in recent quarters, although there are signs of a gradual recovery in 2025/26. Dual-track processes are employed selectively but remain the exception, given the additional complexity and cost involved. Such processes tend to be reserved for larger healthcare companies where the potential valuation uplift from competitive tension justifies the incremental expense.

Healthcare companies in Germany that pursue a public listing will typically seek admission to the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse), either on the regulated market or on the open market segment. A domestic listing avoids the additional regulatory burden and cost associated with complying with foreign securities laws. However, certain sub-sectors – particularly biotechnology – have historically seen German companies consider listings on NASDAQ or Euronext Amsterdam, where deeper pools of specialist healthcare investors may support more favourable valuations.

A foreign listing does not alter the company’s status as a German corporation, and it remains subject to the full scope of applicable German corporate law and becomes subject to the rules of the stock exchange it is listed on. This dual regulatory framework inevitably increases the complexity, cost and timeline of a sales process. For healthcare companies, this consideration is particularly relevant where a foreign-listed German biotech or medtech company becomes a takeover target, as the interplay between German corporate law, foreign securities regulations and sector-specific regulatory approvals (such as change-of-control notifications under pharmaceutical or medical device licences) can create additional layers of complexity.

The choice between a structured auction process and a bilateral negotiation depends on the specific circumstances of each transaction. Where market conditions and the profile of the target company permit, sellers will generally favour a competitive auction process to maximise value, in particular for attractive assets such as specialty pharmaceutical portfolios, medical device businesses or digital health platforms. Bilateral negotiations tend to be preferred where confidentiality is paramount – for instance, in transactions involving sensitive regulatory licences or proprietary clinical data – or where a single buyer has a clear strategic rationale that is unlikely to be matched by other bidders.

Sale processes are typically structured as share deals whereby the company as a whole is transferred. Where this is not feasible, parties consider asset deal structures, which require third-party consents for the transfer and assignment of contractual relations and may impact closing certainty.

In the prevailing market practice, the entirety of the company is sold, with all existing investors exiting simultaneously. This clean-exit approach is particularly favoured by financial sponsors and VC investors seeking full liquidity. In certain healthcare transactions, however, buyers may request that founders or key management personnel – particularly those with critical scientific, medical or regulatory expertise – remain involved in the business for a transitional period. Such arrangements are frequently linked to deferred consideration mechanisms (earn-outs), which in the healthcare context may be tied to the achievement of specific milestones such as regulatory approvals, clinical trial endpoints or revenue targets for particular products or therapies.

The vast majority of private healthcare M&A transactions in Germany are structured as cash deals. Stock-for-stock or mixed consideration structures are comparatively rare in the private company context, though they may be encountered in larger strategic combinations. Earn-out arrangements linked to regulatory or commercial milestones are a notable feature, effectively creating a hybrid consideration structure that bridges valuation gaps – particularly in transactions involving early-stage pharmaceutical or medical device companies with products in the regulatory approval pipeline.

Representations and Warranties

The scope of representations and warranties and the allocation of post-closing liabilities are subject to extensive negotiation. Financial investors will typically seek to limit their exposure to fundamental warranties (such as title to shares and capacity) and resist providing business-related representations, which are instead pushed to the selling founders or management team. In the healthcare sector, particular attention is paid to representations concerning:

• regulatory compliance (including pharmaceutical and medical device approvals);
• intellectual property ownership;
• clinical trial data integrity; and
• compliance with anti-bribery and healthcare fraud regulations.

Escrow/Holdbacks

Escrow or holdback arrangements remain common, particularly for healthcare transactions where specific identified risks (such as pending regulatory proceedings or unresolved product liability claims) warrant ring-fenced protection.

W&I Insurance

Warranty and indemnity (W&I) insurance has become increasingly prevalent in the German M&A market and is now regularly used in healthcare transactions, particularly in auction processes where sellers seek to achieve a clean exit with limited residual liability exposure. W&I insurance policies in the healthcare context may, however, contain sector-specific exclusions (eg, for known regulatory risks or product liability claims), which require careful negotiation.

Spin-offs are a well-established restructuring tool employed by large healthcare conglomerates to sharpen their strategic focus and unlock shareholder value. More recently, the broader trend of portfolio optimisation has led pharmaceutical and life sciences companies to evaluate the separation of non-core business lines to allow both the parent and the spun-off entity to pursue more focused growth strategies. It is anticipated that this trend will continue, particularly as healthcare companies face increasing pressure from investors to streamline operations and allocate capital more efficiently to high-growth therapeutic areas.

Spin-offs in Germany can be structured tax-neutrally at both the corporate and shareholder level, provided that certain statutory requirements are satisfied. The central prerequisite is that the assets being spun off must constitute a separate business unit (Teilbetrieb) within the meaning of the German Transformation Tax Act (Umwandlungssteuergesetz – UmwStG). In case of split-off (Aufspaltung) this applies to both parts of the assets. A 100% shareholding in a corporation and a whole co-entrepreneur partnership interest (Mitunternehmeranteil) or a part thereof are deemed to qualify as such a separate business unit. In the case of a spin-off (Abspaltung) – as distinct from a hive-down (Ausgliederung) – both the transferred assets and the assets remaining with the transferring entity must each independently qualify as a separate business unit. For healthcare groups, this requirement necessitates careful advance planning to ensure that the relevant business divisions are properly delineated and that intercompany arrangements (such as shared services, licensing agreements or supply contracts) do not undermine the qualification of either segment as a standalone business unit.

While a spin-off may in principle be immediately followed by a business combination, such sequential structures are not customary in the German market. The primary concern is that an immediately subsequent combination may jeopardise the tax-neutral treatment of the preceding spin-off due to the transaction being viewed as a pre-arranged disposal rather than a genuine restructuring.

The overall timeline for completing a spin-off typically spans at least 12 months from the initial project kick-off to consummation, though the duration varies significantly depending on the complexity of the carve-out and the operational readiness of the entities involved. Key timeline drivers include:

• the preparation of carve-out financial statements;
• the negotiation of transitional service agreements;
• the separation of IT systems and shared infrastructure; and
• compliance with statutory notice and consultation periods – particularly vis-à-vis works councils and economic committees, where applicable.

In the healthcare sector, additional time must be allocated for the transfer or re-registration of regulatory licences and permits (such as manufacturing authorisations, marketing authorisations for pharmaceutical products, or CE markings for medical devices), which may require engagement with the relevant regulatory authorities. A binding ruling from the tax authorities (verbindliche Auskunft) on the tax-neutral treatment of the spin-off is not legally required but is frequently sought in practice to provide legal certainty regarding the tax consequences of the spin-off. The binding ruling can only be obtained prior to the implementation of the spin-off. Obtaining such a binding ruling typically takes several months and may add to the overall timeline of the spin-off.

General

Prospective bidders may consider acquiring shares in a listed target company in advance of announcing a public takeover offer. However, any such stakebuilding activity triggers disclosure obligations under the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG): if a shareholder reaches, exceeds or falls below the thresholds of 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% or 75% of the voting rights, this must be notified to both the target company and the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) without undue delay. Shares held by affiliated entities or by third parties acting in concert are attributed to the acquirer. Furthermore, bidders must be mindful of the mandatory offer obligation triggered upon reaching 30% of the voting rights (see 6.2 Mandatory Offer).

Impacts on Takeover Offers

Bidders should also note that any acquisitions of target shares by the bidder, its affiliates or persons acting in concert within the six-month period preceding the announcement of the intention to launch a takeover offer are relevant for the determination of the minimum offer price. The highest price paid during this reference period establishes a floor for the offer consideration.

Under the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz – WpÜG), a mandatory offer for all outstanding shares in the target company is triggered when a shareholder – whether acting alone or in concert with others – acquires 30% or more of the voting rights. The BaFin may grant exemptions from the mandatory offer obligation in specific circumstances, for example where control was acquired unintentionally or through inheritance.

Public takeover transactions in Germany are predominantly structured as voluntary or mandatory offers directed at all outstanding shares of the listed target company. Partial offers are permissible (except for mandatory offers) but rarely employed. While the German Transformation Act (UmwG) provides for merger structures, these are uncommon because mergers require approval by a qualified majority of at least 75% of the share capital represented at the shareholders’ meeting, which introduces significant execution risk and exposes the transaction to potential shareholder challenges (Anfechtungsklagen). In the healthcare sector, where listed targets may have dispersed shareholder bases, the tender offer route is strongly preferred.

Mandatory Offer

The bidder must offer consideration in the form of cash or liquid shares admitted to trading on a regulated market within the European Economic Area (EEA). The shares offered as consideration need not be shares of the bidder itself. In addition to this mandatory consideration component, the bidder may offer a voluntary alternative consideration, which may consist of listed or unlisted shares (including shares listed outside the EEA). A cash consideration becomes mandatory where the bidder has acquired 5% or more of the target’s shares for cash within the six months preceding the announcement of the offer.

Minimum Pricing Rules

The offer consideration must equal or exceed the higher of the following two benchmarks:

• the highest consideration directly or indirectly paid or agreed by the bidder (including persons acting in concert) for target shares during the six months preceding the commencement of the acceptance period; and
• the volume-weighted average stock exchange price of the target shares during the three months preceding the public announcement of the offer, as calculated and published by BaFin.

The mandatory consideration is subject to retroactive upward adjustment to reflect any higher price directly or indirectly paid or agreed by the bidder (including persons acting in concert) outside the offer during the acceptance period or, in the case of off-exchange acquisitions, during the 12 months following the expiration of the acceptance period.

Where the bidder offers both a mandatory and a voluntary alternative consideration, it may be possible to allocate a valuation premium exclusively to the voluntary alternative component (eg, unlisted shares in the bidder), provided that the mandatory consideration satisfies the minimum pricing requirements. The feasibility of such structures should be discussed with BaFin on a case-by-case basis.

Voluntary Versus Mandatory Offers

A voluntary takeover offer may be made subject to conditions, provided that the fulfilment of such conditions does not lie within the direct or indirect control of the bidder. Accordingly, subjective conditions – such as a financing contingency or unilateral withdrawal rights – are not permissible. By contrast, a mandatory takeover offer may not be made subject to any conditions whatsoever.

Customary and Permitted Offer Conditions

With the exception of regulatory conditions (including merger control and foreign investment clearances), BaFin generally does not permit conditions that reference events or circumstances occurring after the expiration of the acceptance period. Typical conditions for voluntary takeover offers comprise:

• regulatory conditions (including merger control);
• minimum acceptance level;
• MAC (designed to be determined by independent third party); and
• absence of defence actions by target (in hostile/semi-hostile situations).

Offer Document

The offer document must be prepared in the German language and submitted to BaFin for review. It is required to contain, inter alia, the following information:

• summary;
• description of bidder, target and shares subject to the offer (including target shares held by the bidder and relevant acquisitions prior to the voluntary takeover offer);
• consideration (kind and amount);
• offer conditions (including status of regulatory proceedings);
• commencement date and expiration of the acceptance period;
• any measures taken by the bidder to ensure its ability to pay the consideration offered;
• potential effects of a successful voluntary takeover offer on the asset, financial and earnings position of the bidder (which in practice requires respective pro formas);
• the bidder’s intentions with respect to the target’s future business;
• financing confirmation, issued by an independent financial services institution covering (in general) all target shares other than those held by the bidder;
• all benefits granted or promised to the target’s management and supervisory board members;
• elements of a listing prospectus in case the bidder intends to offer shares as consideration; and
• accuracy and completeness confirmation by bidder.

In practice, bidders will additionally publish a non-binding English-language convenience translation of the offer document on the transaction website.

Business Combination Agreements

The bidder and the target may enter into a business combination agreement (BCA) or investment agreement setting out the key parameters of the transaction and the post-completion integration. Such agreements may address matters including the preservation of the target’s corporate identity, the continuation of business sites and research facilities, workforce commitments, and – in the healthcare context – the maintenance of specific R&D programmes, clinical development pipelines or regulatory approvals. The willingness of the target’s management to support the offer is frequently contingent upon the bidder entering into such commitments. BCAs include, in general, descriptions of the goals and timing of the transaction (providing an indication whether the transaction is in the company’s best interest), issuance of supportive opinions by target’s boards, break fees, fiduciary out provisions and, not frequently, operative measures (including R&D co-operations)

A BCA should not allow for instruction rights of the bidder vis-à-vis the target, to ensure that the agreement is not deemed a (hidden) domination and profit and loss transfer agreement (Beherrschungs- und Gewinnabführungsvertrag), which would be subject to special and strict rules.

Irrevocable Undertakings

Depending on the shareholder structure of the target company, bidders might try to enter into so-called irrevocable undertakings pursuant to which (key) shareholders of the target company – irrevocably – agree to tender their shares into the takeover offer (see 6.12 Irrevocable Commitments).

Minimum Acceptance Threshold

BaFin permits bidders to include minimum acceptance thresholds in voluntary takeover offers; mandatory offers may not be made subject to any conditions. The threshold level varies depending on the bidder’s post-acquisition objectives. Where the bidder intends to implement a domination and profit and loss transfer agreement (DPLTA), which requires approval by a 75% majority of the share capital represented at the shareholders’ meeting, bidders will typically set the acceptance threshold by reference to historical attendance levels at the target’s general meetings – commonly resulting in thresholds in the range of 60% to 75%. In the healthcare sector, where listed targets may have concentrated institutional shareholder bases, the calibration of the acceptance threshold requires particularly careful analysis of the shareholder register.

Back-End Speculation

In the context of voluntary takeover offers, hedge funds and other activist investors frequently engage in so-called back-end speculation strategies. These investors acquire shares in the target after the announcement of the offer with the objective of profiting from the economic implications of a future DPLTA – in particular, the guaranteed dividend and cash exit compensation. Such investors may seek to negotiate an increase in the offer price as a condition for tendering their shares, which can be critical where the bidder requires their acceptance to meet the minimum acceptance threshold. This dynamic has become an increasingly significant factor in the structuring and pricing of German public takeover offers.

German law provides for three distinct squeeze-out mechanisms, each with different ownership thresholds and procedural requirements.

• Merger squeeze-out (Verschmelzungsrechtlicher Squeeze-Out) – available where the majority shareholder holds at least 90% of the target’s share capital. The squeeze-out is effected by way of an upstream merger of the target into a stock corporation (AG) controlled by the majority shareholder, resulting in the compulsory exit of all remaining minority shareholders and the termination of the target’s stock exchange listing. For this reason, bidder acquisition vehicles are sometimes structured as stock corporations from the outset to facilitate a subsequent merger squeeze-out.
• Stock Corporation Act squeeze-out (Aktienrechtlicher Squeeze-Out) – available where the majority shareholder holds at least 95% of the target’s share capital. The squeeze-out is resolved upon by the target’s shareholders’ meeting and requires a simple majority vote (which the majority shareholder can achieve unilaterally).
• Takeover squeeze-out (Übernahmerechtlicher Squeeze-Out) – available where the bidder holds at least 95% of the target’s share capital upon expiration of the additional acceptance period following a successful takeover offer. This form of squeeze-out is decided by the Regional Court (Landgericht) of Frankfurt am Main and does not require a shareholders’ meeting resolution. Where at least 90% of the shares subject to the tender offer have been tendered, the offer price is presumed to constitute adequate squeeze-out compensation.

In practice, the merger squeeze-out and the Stock Corporation Act squeeze-out tend to be completed more quickly than the takeover squeeze-out and are therefore the preferred routes.

Certain Funds Confirmation

Where the offer consideration is payable in cash, the bidder must obtain a financing confirmation (Finanzierungsbestätigung) from an independent financial services institution (Wertpapierdienstleistungsunternehmen), confirming that the bidder has taken the necessary measures to ensure the availability of sufficient funds. The confirmation must cover the full volume of the offer on the assumption that all target shares not already held by the bidder are tendered. The confirming institution must generally have its registered office within the EEA, though BaFin has in certain cases accepted confirmations issued by German branches of non-EEA financial institutions, subject to prior consultation.

Non-Tender Agreements

Depending on the transaction structure, the bidder may enter into non-tender agreements and securities blockage arrangements with existing shareholders who have committed not to tender their shares. Such arrangements can reduce the volume of financing required under the financing confirmation and may be strategically advantageous where the bidder has secured irrevocable undertakings from major shareholders.

The range of deal protection measures available under German takeover law is considerably more limited than in the US market. This is partly attributable to the statutory duty of neutrality (Neutralitätspflicht) imposed on the target’s management board, which significantly restricts the board’s ability to take actions that could frustrate or impede a takeover offer.

Break-up fees may be agreed in the context of a business combination agreement and are permissible in principle. However, they are not commonly employed in German public M&A transactions for two principal reasons: first, any break-up fee arrangement must be disclosed in the offer document, which may attract scrutiny from shareholders and the market; and, second, the fee must be structured so as not to impair the management board’s discretion to withdraw its support for the offer if circumstances change – a requirement that limits the practical deterrent effect of such provisions.

No-shop or non-solicitation provisions may be included in a business combination agreement, but must in all cases be subject to a robust fiduciary out clause. This fiduciary out must permit the target’s management board to evaluate unsolicited competing offers and, where a competing proposal is determined to be more favourable to the company and its stakeholders, to withdraw its support for the initial offer and instead endorse the competing proposal.

Domination and Profit-Sharing Agreement

A domination and profit and loss transfer agreement (Beherrschungs- und Ergebnisabführungsvertrag – DPLTA) is a distinctive instrument of German corporate law that enables a majority shareholder to exercise comprehensive control over the target’s business operations, integrate the target into the group’s cash pooling arrangements, and establish a fiscal unity (Organschaft) for tax purposes. While the corporate governance framework of a listed AG or SE ordinarily affords the management board broad discretion, a DPLTA confers upon the controlling shareholder the right to issue legally binding instructions to the target’s management. In return, the controlling shareholder receives the target’s annual profits and is obligated to compensate for any annual losses.

The conclusion of a DPLTA requires the holding of a stake of at least 75% of the share capital represented at the respective shareholders’ meeting of the target approving the DPLTA. Due to this requirement, a 75% minimum acceptance threshold and condition is part of many voluntary takeover offers, which to date is more and more reconsidered in light of hedge fund exposure (see 6.7 Minimum Acceptance Conditions). Given the increased governance rights of the majority shareholder, mandatory law provides for various minority protection rights.

• Cash exit right to the benefit of shareholders enabling them to exit the target company against a compensation in cash, which is determined based on statutory requirements and guidelines. The valuation is in practice frequently challenged by minority shareholders in special court proceedings, which typically last for several years and often result in a significant increase in the initially offered cash exit compensation. It needs to be noted that shareholders may accept the cash exit at any time until two months after a binding decision in a special court proceeding has been announced.
• Guaranteed dividend for those shareholders who decide to stay in the company and do not trigger the exit against cash compensation.
• Interest payment on the cash compensation amounts to 5% above the respective base rate.
• Guarantee by ultimate shareholder – in practice, the performance under the DPLTA to pay a cash compensation and a guaranteed dividend is usually guaranteed by the ultimate controlling shareholder.

Squeeze-Out

Please see 6.8 Squeeze-Out Mechanisms for squeeze-out related aspects.

Irrevocable undertakings – agreements pursuant to which shareholders of the target company commit to tender their shares into the offer, subject to specified conditions – are a frequently employed tool in German public takeover transactions. Such undertakings provide the bidder with greater certainty regarding the likely level of acceptances and can be instrumental in achieving the minimum acceptance threshold. However, the terms of any irrevocable undertaking must not confer more favourable economic terms on the committing shareholder than those available to all shareholders under the offer, as this would violate the equal treatment principle (Gleichbehandlungsgrundsatz) enshrined in the WpÜG.

The offer document must be submitted to BaFin for review prior to publication. BaFin examines the document for completeness and compliance with the statutory requirements, including verification of the offer price against the minimum pricing rules based on weighted average market prices. BaFin does not approve the offer in a substantive sense but may prohibit its publication if the document does not meet the statutory requirements.

The WpÜG establishes a regulatory framework for the offer timeline, within which the bidder has discretion to set the specific acceptance period (see 6.14 Timing of the Takeover Offer). The bidder may also seek to obtain key regulatory approvals – such as merger control or foreign investment clearances – between the announcement of the offer and the publication of the offer document, in order to reduce execution risk during the acceptance period.

Key milestones of the offer process are as follows:

• submission of draft offer document to the BaFin by bidder for review within four weeks following the announcement of the intention to launch an offer (may be extended by up to a further four weeks for cross-border offers or if the offer shall be financed by newly issued equity);
• publication of offer document and submission to the target immediately after the BaFin grants its approval or if BaFin does not prohibit the offer within a period of ten working days (prolongable by BaFin for up to five additional working days);
• joint or separate reasoned opinions to be published by management and supervisory board without undue delay (in practice no longer than two weeks) after receipt of the offer document;
• initial acceptance period of voluntary takeover offer (at the discretion of the bidder) of four to ten weeks, which will be amended in case a competing offer is launched to match the acceptance period of the competing offer;
• within this period, weekly publication of levels of acceptance (daily during the last week);
• publication of final results without undue delay after the expiration of the acceptance period;
• commencement of additional two weeks’ acceptance period in the case of a successful voluntary takeover offer enabling those shareholders who did not yet accept the voluntary takeover offer to tender their shares;
• publication of results by bidder after the expiration of the additional acceptance period; and
• closing of the voluntary takeover offer and the settlement of the voluntary takeover offer only once any regulatory conditions are satisfied.

Sector-Specific Regulation

The healthcare industry in Germany is subject to extensive sector-specific regulation. The applicable permits and approval timelines depend heavily on the business model.

Medicinal Products and Medical Devices

Companies manufacturing medicinal products in Germany generally require a manufacturing authorisation under the German Medicinal Products Act (Arzneimittelgesetz – AMG). Separate authorisations may be required for other activities, such as wholesale distribution. Placing medicinal products on the market generally requires a national or EU marketing authorisation, depending on the product.

Medical devices must comply with the EU Medical Devices Regulation (MDR) and in vitro diagnostic medical devices must comply with the In Vitro Diagnostic Regulation (IVDR). Both regulations include the need for an appropriate conformity assessment according to the risk class, and mandatory CE marking. For many higher-risk devices, a notified body must be involved in the conformity assessment before the device can be placed on the market. Manufacturers or other responsible economic operators are subject to, inter alia, vigilance and post-market surveillance obligations to be carried out by the competent authorities.

Healthcare Providers and Digital Health

Operators of hospitals and other healthcare facilities may require licences or approvals under state law and, where statutory health insurance reimbursement is relevant, admission to hospital planning or a supply contract with the statutory health insurance funds. Outpatient care structures, including medical care centres (Medizinische Versorgungszentren – MVZ), are subject to separate admission rules involving the statutory health insurance physicians’ associations and admission committees.

Digital health companies may be subject to several overlapping regimes, including medical device law, data protection law, cybersecurity requirements and, where reimbursement as a digital health application (Digitale Gesundheitsanwendung – DiGA) is sought, the DiGA framework under the German Social Code. DiGA manufacturers must apply to BfArM for inclusion in the DiGA directory as a prerequisite for reimbursement by the statutory health insurance system.

Authorities and Timing

The authorities involved depend on the sector and may include BfArM, the Paul-Ehrlich-Institut, competent state authorities, hospital planning authorities, statutory health insurance physicians’ associations and admission committees.

Timelines vary significantly. A straightforward notification or registration may be completed within weeks, while licensing, hospital planning, MVZ admission, notified body certification or medicinal product authorisation procedures can take several months or longer. For DiGA applications, BfArM’s Fast Track procedure is designed around a three-month review period after submission of complete application documents, with a possible extension in certain cases.

Transaction Relevance

In M&A transactions, changes of control or changes in the licensed operating structure may trigger notification or approval requirements, depending on the sector. This should be checked early, particularly for hospitals, MVZ structures, pharmacies, pharmaceutical manufacturing or wholesale distribution businesses and other licensed healthcare operators. Data protection, professional secrecy, advertising, reimbursement and anti-corruption rules should also be assessed at an early stage where the business model involves health data, patient steering, interaction with healthcare professionals or co-operation with pharmacies, hospitals or physicians.

The primary securities market regulator overseeing public M&A transactions in Germany is the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin), which is responsible for reviewing and clearing offer documents under the WpÜG, monitoring compliance with disclosure obligations, and enforcing the rules governing public takeover offers.

Competent Authorities

Restrictions on foreign direct investment in Germany are governed by the Foreign Trade and Payments Act (Außenwirtschaftsgesetz – AWG) and the Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung – AWV). The competent screening authority is the Federal Ministry for Economic Affairs and Energy (Bundesministerium für Wirtschaft und Energie – BMWE). If a foreign investment is subject to review, the BMWE co-ordinates with other federal agencies, including the Federal Office for Information Security (Bundesamt für Sicherheit in der Informationstechnik – BSI), the Federal Ministry of Health, and the intelligence services. In the healthcare sector, foreign investment screening has gained particular relevance following the COVID-19 pandemic, which heightened awareness of the strategic importance of domestic pharmaceutical manufacturing capacity, vaccine production and critical medical supply chains.

Review Thresholds

Under the AWV, a direct or indirect acquisition of, or participation in, a German target company (or the German branch of a non-German company) by a foreign investor may be subject to review by the BMWE. The rules apply to share deals exceeding specified voting rights thresholds (10%, 20% or 25%, depending on the sector) as well as certain asset deals involving the acquisition of a separable operating unit (abgrenzbarer Betriebsteil). Increases in existing voting rights above the thresholds of 20%, 25%, 40%, 50% or 75% of voting rights may also trigger a review obligation. There is no de-minimis turnover or transaction-value threshold.

In the healthcare sector, the screening regime applies to investments by investors domiciled outside the European Union and the European Free Trade Association (EFTA).

Sensitive Sectors Triggering a Notification Requirement

The non-defence-related activities subject to mandatory filing are enumerated in Section 55a AWV and currently comprise 27 categories. Healthcare companies may fall within the scope of the screening regime if they are active in sectors deemed critical to public health or national security. For example:

• companies involved in the development or manufacture of –
1. pharmaceuticals,
2. vaccines,
3. antibiotics,
4. personal protective equipment or other essential medical goods, or
5. in-vitro diagnostic products;
• operators of critical healthcare infrastructure (such as hospitals above certain capacity thresholds); and
• providers of cloud computing or AI-based services used in healthcare.

Review Process

If the German target carries out activities falling within the critical sectors as described above, a mandatory notification to the BMWE may be required.

The screening procedure carried out by the BMWE consists of two phases:

• preliminary review (two months), after which the transaction is either approved or an in-depth review is initiated; and
• in-depth review (another four months, extendable).

In case of concerns relating to national security or public order, BMWE may either prohibit the transaction or approve it subject to conditions or instructions to the parties involved. It may also conclude a public law contract with the acquirer, imposing certain conditions which must be adhered to by the acquirer.

Impacts on Transaction

If a filing is mandatory, the parties may not close the transaction before it has been cleared by the BMWE. A violation of this standstill obligation may result in criminal and administrative fines; in addition, the validity of the acquisition is suspended until a clearance from the BMWE has been obtained.

If the business activities of the German target company do not fall within any of the listed sensitive sectors and therefore no filing obligation exists, the parties are free to close the transaction at any time without the need for a foreign investment clearance. However, the BMWE may review any acquisition by a non-EU/EFTA investor of at least 25% of the voting rights in a German target (even outside the listed sectors) on its own initiative if and when it becomes aware of it (for up to five years from the signing of the purchase agreement). To avoid such a post-acquisition review and the risk of a subsequent prohibition and unwinding order, the acquirer may elect to apply for a certificate of non-objection by the BMWE (ie, make a voluntary filing).

Foreign Subsidies Regulation

Since 12 October 2023, the notification obligation for concentrations meeting the thresholds set out in the Foreign Subsidies Regulation (Regulation (EU) 2022/2560 – FSR) are applicable. The FSR applies to both EU and non-EU companies and is designed to address potential distortions of the internal market caused by subsidies granted by non-EU governments. The M&A-related notification obligation under the FSR is triggered if (i) the acquired company, one of the merging parties or the joint venture generates EU-wide turnover of at least EUR500 million, and (ii) the parties have received aggregate foreign financial contributions exceeding EUR50 million in the three years preceding the transaction.

Notifiable transactions are subject to a standstill obligation and require clearance from the European Commission. In addition, the Commission retains the power to investigate non-notifiable transactions on its own initiative (ex officio review).

While practical experience with the FSR remains limited, the regulation is expected to be relevant for larger healthcare transactions involving acquirers that have received significant government funding – for example, state-backed pharmaceutical companies or sovereign wealth fund-sponsored investors from non-EU jurisdictions.

Beyond the foreign investment screening regime described in 7.3 Restrictions on Foreign Investments, Germany does not maintain a separate national security review process for acquisitions.

Export controls exist primarily with regard to items on the following lists:

• list of dual-use items (Annex I of Regulation (EU) 2021/821); and
• German Export list (Ausfuhrliste, Annex I to the AWV).

In addition, export restrictions may apply where the exporter has been informed, or otherwise has knowledge, that non-listed items are intended for certain military, weapons of mass destruction-related or other sensitive end uses. In the healthcare sector, this may be relevant for dual-use biotechnology, certain chemical precursors or advanced diagnostic equipment.

A merger control filing with the German Federal Cartel Office (Bundeskartellamt – FCO) is required if a transaction constitutes a “concentration” within the meaning of the Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen – GWB) and meets the applicable jurisdictional thresholds.

Regarding the “concentration” test, the following events may trigger German merger control:

• the acquisition of all or of a substantial part of the assets of another undertaking;
• the acquisition of (direct or indirect) control of another undertaking, or parts of it;
• the acquisition of a shareholding in another undertaking if the overall shareholding reaches or exceeds 25% or 50% of the capital or the voting rights; and
• any other acquisition enabling one or several undertakings to (directly or indirectly) exert a competitively significant influence on another undertaking.

Regarding the jurisdictional thresholds, a filing is required if, in the last completed financial year preceding the concentration, all the following criteria are met:

• the combined worldwide turnover of all undertakings concerned exceeded EUR500 million;
• the German turnover of at least one undertaking concerned exceeded EUR50 million; and
• the German turnover of one other undertaking concerned exceeded EUR17.5 million.

If the thresholds above are not met, a filing may still be required if the “size-of-transaction” test is met, which was introduced in 2017 specifically with the aim to capture acquisitions of start-ups with little turnover and high market potential (so-called killer acquisitions). A filing is required if all of the following criteria are met with regard to the last completed financial year preceding the concentration:

• the combined worldwide turnover of all undertakings concerned exceeded EUR500 million;
• the German turnover of one undertaking concerned exceeded EUR50 million;
• the value of the consideration for the concentration exceeds EUR400 million; and
• the target undertaking has substantial operations in Germany.

The “size-of-transaction” test is particularly relevant for transactions in the healthcare sector as pharmaceutical or biotech target companies are often acquired at an early stage when they have not generated (significant) turnover yet but are valued above EUR400 million due to R&D, know how or potential pipeline products. The Federal Court of Justice (17 June 2025, KVR 77/22) recently confirmed a broad reading of the “substantial domestic operations” requirement and thus a wide scope of the merger control provisions, which is relevant for high-valuation pharma and biotech targets with limited German turnover.

If a filing is required, the transaction is subject to a standstill obligation and may not be closed until clearance has been obtained from the FCO. A violation of this obligation may result in administrative fines of up to 10% of the undertaking’s worldwide group turnover; moreover, the legal validity of the acquisition is suspended pending clearance.

In the healthcare sector, merger control has become increasingly rigorous, particularly in transactions involving pharmaceutical products where the parties’ portfolios overlap in specific therapeutic areas or where the acquisition may reduce competition in the supply of essential medicines or medical devices. In pharmaceutical cases, the FCO usually also gives weight to pipeline products and their potential competitive pressure on existing products.

Sector-Specific Exemption for Hospital Mergers

Hospital mergers benefit from a sector-specific exemption from German merger control if the competent Federal State authority – after consulting the FCO – confirms that the merger is necessary to improve hospital care.

Germany has a comprehensive framework of employee protection rights at both the individual and collective level. In the context of healthcare M&A transactions, the following considerations are of particular importance, noting that the healthcare sector is characterised by:

• high levels of unionisation;
• extensive works council representation; and
• sector-specific collective bargaining agreements (Tarifverträge).

Works Council Consultation

Where a works council (Betriebsrat) or economic committee (Wirtschaftsausschuss) has been established at the target company – which is common in larger healthcare organisations – the employer is obligated to inform the relevant body sufficiently in advance of signing to allow it to form a view. In private M&A transactions, the opinions of employee representatives are not published. In practice, the information obligation has not proven to be a material impediment to transaction execution, as timely consultation is generally not a condition for the legal validity of the share purchase agreement. However, where post-signing implementation measures are carried out under the UmwG, the relevant transformation documentation must be made available to the competent works council at least one month prior to the shareholders’ resolution.

Co-Determination

Germany operates a system of corporate co-determination (Mitbestimmung) at the supervisory board level. Companies (of certain legal forms) or corporate groups with generally more than 500 employees are required to reserve one third of the supervisory board seats for employee representatives. For companies or groups with generally more than 2,000 employees, the supervisory board must be composed of equal numbers of shareholder and employee representatives, pursuant to the Co-Determination Act (Mitbestimmungsgesetz – MitbestG).

Germany does not impose general currency controls on M&A transactions. Central bank (Bundesbank) approval is required only in the context of acquisitions involving regulated financial institutions (banks and insurance companies).

Hospital Reform as the Key Development

The most significant legal development for healthcare M&A in Germany in the past three years has been the hospital reform implemented through the Hospital Care Improvement Act (Krankenhausversorgungsverbesserungsgesetz – KHVVG). The KHVVG entered into force on 1 January 2025 and represents the most important restructuring of the German hospital regulatory and reimbursement framework in many years.

The reform introduces defined service groups (Leistungsgruppen), quality criteria and a new remuneration element based on the availability of hospital capacities. It therefore reduces the exclusive focus on case-based DRG remuneration and increases the importance of a hospital’s structural role, quality profile and permitted service portfolio.

For M&A purposes, the reform creates both uncertainty and strategic opportunity. Investors and operators must assess whether a target hospital’s service portfolio, quality infrastructure, staffing, regional role and expected allocation of service groups support a sustainable business model under the new framework. The reform is also likely to remain relevant for consolidation, specialisation and restructuring projects in the hospital sector.

Other Relevant Developments

The MDR remains highly relevant for medtech transactions, although it is not a Germany-specific development. Regulation (EU) 2023/607 extended the transition periods for certain legacy devices, subject to conditions, and MDR readiness remains a key diligence item for medical device targets. Buyers should review the status of CE certificates, notified body arrangements, technical documentation, clinical evaluation, post-market surveillance and whether the target can continue placing key products on the market during the transition period.

Digital health legislation is another important deal driver. The DiGA framework, the continued development of digital health reimbursement pathways and the broader digitalisation of statutory healthcare have made regulatory status, reimbursement eligibility, data access, cybersecurity and interoperability key issues in transactions involving digital health companies. A listing in the BfArM DiGA directory can be commercially significant because it creates a statutory reimbursement route, but buyers should also test whether the product’s evidence base, pricing, medical device status and data protection concept are robust enough to support the business plan.

Disclosure in Healthcare Transactions

Recent Federal Court of Justice case law on transaction disclosure (in general and not only healthcare specifically) should also be considered. In its judgment of 15 September 2023 – V ZR 77/22, the BGH held, in the context of a real estate transaction, that placing information in a virtual data room does not automatically satisfy the seller’s disclosure obligations if the seller cannot reasonably expect the buyer to identify the relevant information. Sellers should therefore ensure that material licensing, reimbursement, compliance, product and authority-related risks are clearly disclosed.

General Consideration

The management board of a listed target company may permit a prospective bidder to conduct due diligence, provided that doing so is in the best interests of the company. In making this assessment, the management board must weigh all relevant factors, including the likelihood of the transaction’s successful completion, the bidder’s stated objectives, the potential implications for the company’s business operations and employees, and – in the healthcare context – the potential impact on patient care, ongoing clinical programmes and regulatory relationships.

Non-Disclosure Agreements

Even where the management board concludes that permitting due diligence is in the company’s interest, it must require the bidder to enter into a comprehensive non-disclosure agreement prior to the disclosure of any confidential information. Furthermore, the management board should implement a staged disclosure process (staggered data room), with the depth and sensitivity of information disclosed increasing in line with the progress of the transaction. In healthcare transactions, this staged approach is particularly important given the sensitivity of the information involved, which may include proprietary clinical trial data, patient-related information, regulatory correspondence, and pharmaceutical pricing and reimbursement arrangements.

Insider Trading Rules

In conducting a due diligence, bidders need to carefully consider insider trading and information rules as any inside information disclosed in a due diligence may limit the ability of the bidder to acquire shares outside the tender process. This may even apply to cancellations or amendments of pending orders relating to the target shares, which may qualify as insider trading.

Due diligence of healthcare companies raises particularly acute data privacy concerns given the volume and sensitivity of personal data processed in the sector. The disclosure of information from the seller to the prospective buyer must comply with the GDPR, which classifies health data as a special category of personal data subject to enhanced protection. Processing of health data is prohibited unless a specific exemption applies. In the M&A context, the disclosure of patient data, clinical trial participant information or employee health records requires careful anonymisation or pseudonymisation. The legitimate interest basis may justify the disclosure of certain categories of personal data but is generally insufficient to legitimise the transfer of health data without additional safeguards. Where the prospective buyer is located outside the EU/EEA, the international transfer of personal data requires appropriate transfer mechanisms (such as Standard Contractual Clauses (SCCs) or an adequacy decision), adding further complexity to cross-border healthcare M&A due diligence.

A bidder is required to publish its intention to launch a takeover offer without undue delay after the decision to proceed has been taken. Under the WpÜG, the announcement must be disseminated via an electronic information system (such as Reuters or Bloomberg) and published on the internet. In practice, bidders establish dedicated transaction websites on which all offer-related information and documents are published throughout the process. The bidder must separately notify BaFin and the target company of its intention. Upon receipt, the target company is required to immediately publish an ad hoc announcement pursuant to Article 17 of the Market Abuse Regulation (MAR).

The bidder must submit the draft offer document to BaFin for review within four weeks of the publication of its intention to launch the offer (extensions possible in limited scenarios – see 6.14 Timing of the Takeover Offer).

The EU Prospectus Regulation (Regulation (EU) 2017/1129) applies in Germany and generally requires the publication of a prospectus where securities are offered to the public, including in the context of stock-for-stock exchange offers. However, the Prospectus Regulation provides an exemption for securities offered in connection with a takeover by means of an exchange offer, provided that a document containing information describing the transaction and its impact on the issuer is made available to the public in accordance with the Prospectus Regulation. This exemption is regularly relied upon in German public takeover transactions involving share consideration.

The offer document published under the WpÜG must include information on the anticipated effects of a successful takeover offer on the bidder’s asset, financial and earnings position. In practice, this requires the preparation and inclusion of pro forma financial information illustrating the combined financial profile of the bidder and the target on a post-acquisition basis.

The offer document must be filed with BaFin and published on the transaction website established for the purposes of the offer. In addition, the offer document must be made available free of charge at a domestic paying agent (Zahlstelle). Ancillary transaction documents – such as business combination agreements or irrevocable undertakings – are not required to be filed with BaFin, though their material terms must be disclosed in the offer document to the extent they are relevant to the offer.

General Principle

The management board and supervisory board of a listed target company remain bound by the overarching duty to act in the company’s best interest, which under German law is determined by reference to a stakeholder value approach encompassing the interests of shareholders, employees, creditors and the public. The WpÜG imposes a duty of neutrality (Neutralitätspflicht) on the management board, which significantly restricts its ability to take defensive measures or otherwise interfere with the takeover offer.

Reasoned Opinion

The management board and the supervisory board of the target must publish reasoned opinions regarding the voluntary takeover offer, discussing in particular:

• the consideration;
• the consequences of the offer for the target and its employees;
• the bidder’s intentions; and
• the intention of the board members to tender target shares.

The opinions must include a concrete recommendation to shareholders. In practice, the reasoned opinions are informed by one or more fairness opinions obtained from independent financial advisers. The reasoned opinions must be published without undue delay – in practice, within approximately two weeks after publication of the offer document – and are customarily issued as joint opinions of both boards, though separate opinions are also permissible.

German law does not require the formation of a special or ad hoc committee of the board in connection with a takeover offer. However, in practice, the supervisory board may establish a transaction committee (Transaktionsausschuss) to co-ordinate the board’s response to the offer, particularly in complex healthcare transactions where conflicts of interest may arise – for example, where members of the management board hold equity incentives that would vest or accelerate upon a change of control, or where board members have relationships with the bidder or its affiliates.

The target’s management board may play an active role in the transaction process where a BCA is being negotiated. Outside the BCA context, the management board’s role is more circumscribed due to the statutory duty of neutrality. In hostile or unsolicited offer situations, the management board may not, without the prior approval of the supervisory board, take any measures that could frustrate the offer. Shareholder litigation challenging the board’s recommendation is relatively uncommon in Germany, though minority shareholders may challenge the adequacy of the offer consideration in appraisal proceedings (Spruchverfahren) following a squeeze-out or DPLTA.

The management board and supervisory board of the target company will customarily retain independent legal counsel and financial advisers in connection with a takeover offer. The boards will obtain one or more fairness opinions from independent financial institutions to support their assessment of the adequacy of the offer consideration. In larger healthcare transactions, the boards may also engage sector-specialist advisers to evaluate the strategic and operational implications of the proposed transaction.