Rewards for German rescues

When looking at Europe these days, the German economy stands out from otherwise murky waters, so it’s not surprising to see a growing interest from Chinese investors in acquiring German medium-size companies, the so-called Mittelstand, which are at the core of the economy. And the investment opportunities are widely available in areas such as automotive supply, the energy sector (including renewables), machinery, retail and others.

The German economy and legal framework are very open to Chinese investors. There are practically no legal restrictions for investors to acquire businesses. There are only three regulatory requirements that Chinese investors should keep in mind when considering an M&A transaction in Germany.

• Merger control: Most acquisitions are subject to merger control clearance by the German Federal Cartel Office. However, unless the Chinese investor has already significant business activities in Europe, the process is very simple and can be concluded in six to eight weeks.
• Foreign investment restrictions: There are very few industry sectors, most notably the defence industry, for which foreign investors need to obtain special permission from the German government. In all other sectors, Chinese investors are free to invest. In theory, the German government is entitled to intervene if it considers an acquisition to affect “public policy”, but it has not done so since the law was enacted.
• Sector-specific requirements: In a few sectors, specific requirements apply. For example, in the finance industry management must meet certain personal qualifications.

Burkard Göpfert is a partner of Gleiss Lutz. He can be contacted at +49 89 21667-224 or by e-mail at burkard.goepfert@gleisslutz.com

Michael Burian is a partner of Gleiss Lutz. He can be contacted at +49 711 8997-344 or by e-mail at michael.burian@gleisslutz.com