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Germany: Federal Government extends review of acquisitions by acquirers of German companies

  • United Kingdom
  • Competition, EU and Trade


The German Federal Government (Bundesregierung) has amended the Foreign Trade Regulation (Außenwirtschaftsverordnung, AWV), reinforcing its powers to scrutinize acquisitions of businesses in vital sectors and to intervene in such transactions1. Potential acquirers and now target companies face extended obligations to report proposed transactions concerning certain sectors which involve parties resident outside of the EU and the European Free Trade Association (EFTA). As a result of the changes, such parties have lower security in planning and implementing their transactions.

1. The regime in force before the amendment (§§ 55-62 of the AWV) allowed the Federal Ministry of the Economy and Energy (Bundesministerium für Wirtschaft und Energie, BMWi) to scrutinize acquisitions by non-EU residents of German companies within three months of the parties having signed a share or asset purchase agreement (SPA) and empowered the BMWi to step in when "public safety and order of the Federal Republic of Germany" was likely to be endangered, regardless of the sector concerned (sektorübergreifende Kontrolle, cross-sector review). The standards for “public safety and order” were the same as those for restrictions to the fundamental freedoms of movement of goods, movement of persons, capital and services in Articles 36, 52 and 65 of the Treaty on the Functioning of the European Union (TFEU), but the BMWi had a certain margin of discretion. Acquirers from EFTA countries are treated the same as EU residents.

When a foreign acquirer, resident outside Germany, wished to acquire a German company which manufactured specific goods considered as particularly sensitive, i.e.

  • conventional weapons of war,
  • engines or gear mechanisms for tanks, or
  • encryption software,

the acquirer was obliged to notify the BMWi of such intent, and the BMWi could review and intervene within one month from receipt of the notification (sektorspezifische Kontrolle, sector-specific review, § 60 of the AWV).

Acquirers could also apply voluntarily for a certificate of non-objection (Unbedenklichkeitsbescheini¬gung). An “acquisition” within the meaning of the AWV generally means acquiring 25% or more of the votes in a German target company.

2. The new rules regarding cross-sector review provide, in addition to the existing regime, that public order and security may be endangered ”in particular” if a German target company:

  • engages in operations of ”critical infrastructures” as provided in the Act on the Federal Office for Security in Information Technology2 (§ 55 par. 1 of the AWV as amended). "Critical infrastructures" are defined in a regulation pursuant to the BSiG3 to comprise facilities for: energy and water supply; food production; IT and telecommunications; the healthcare sector; banking and insurance, and transport. The regulation fixes a minimum size for each sector. For example, the threshold for a power plant to be “critical” is a capacity of 420 MW; for a food factory, it is a quantity of 434,500 tons of food or 350 million litres of drinks produced in one year;
  • develops or adapts software which specifically serves the operation of critical infrastructures within the meaning of the BSi Act. “Specific” software is defined in more detail, comprising namely control systems for such operations; and/or
  • is obliged to implement telecommunication surveillance measures under the Telecommunications Act or manufactures technical devices for such measures; provides cloud computing services using infrastructures of a size considered as “critical”, or holds a license to supply components or services for telematics in the context of the electronic health card.

3. In the past, there was no obligation to report or notify transactions subject to the cross-sector review. However, the AWV, as amended, requires that an acquisition of a German company within the meaning of § 55 par. 1 2d sentence of the AWV (see above 2.) must be reported to the BMWi in writing once the SPA has been signed. Furthermore, the BMWi may now review such an acquisition within three months after it has learned that the SPA has been signed (not, as before, within three months of signing). If a transaction has not been notified to the BMWi, the BMWi may open an investigation for cross-sector review up until five years after signing.

4. The Federal Government has also tightened provisions to prevent transactions intended to circumvent the BMWi’s review. In particular, acquisitions by EU companies which do not have their own relevant economic activities in the EU or which do not have a permanent physical presence, such as premises, staff or equipment in the EU (or respectively, in the EFTA) will be subject to the BMWi’s scrutiny.

5. If the BMWi chooses to open an investigation, the immediate acquirer will be obliged to submit documents and information set by the BMWi (§ 57 of the AWV). The BMWi may block the transaction or impose conditions on the acquirer within four months of receipt of all of the requested documents and information. Before the amendment, the deadline for such a review was two months. When the BMWi and the acquirer engage in discussions about possible conditions, the clock stops.

6. The so-called sector-specific review has been extended to include manufacturers abd developers of certain items listed in the German commerce control list (Ausfuhrliste) , comprising military goods for reconnaissance and support of military operations, such as fire-control equipment, sensor technology and related electronic devices, and items for producing such equipment, as listed in the commerce control list. The Federal Government considers these areas as key and anticipates that uncontrolled sales of such businesses would weaken Germany’s security and defense.

For the sector-specific review, the deadline for intervening in a transaction is now three months instead of one month from receipt of the notification.

7. The Federal Government expects no more than ten additional reportable cases per year. It claims to have improved German security interests and to have reinforced fair competition by implementing the amendments – if that is true, there could probably be far more than ten additional investigations per year. M&A transactions involving German target companies in the sectors mentioned now require additional planning and preparation. As the review period could start when the BMWi learns of a transaction and not, as before, when a SPA has been signed, it will often be advisable for acquirers and sellers to approach the BMWi proactively to start the clock. It has to be seen whether the BMWi adopts a cooperative and non-bureaucratic approach to such discussions, and whether, in terms of substance, it will decide the cases in a predictable and investment-friendly way.



9th Regulation to Amend the Foreign Trade Regulation (Neunte Verordnung zur Änderung der Außenwirtschaftsverordnung) of 14 July.2017, BAnz AT (Bundesanzeiger) 17 July 2017, V1.

Gesetz über das Bundesamt für Sicherheit in der Informationstechnik, BSi Act

Verordnung zur Bestimmung Kritischer Infrastrukturne nach dem BSI-Gesetz, BSI-KritisV.

Exhibit AL to the AWV (Anlage 1 Anlage AL zur Außenwirtschaftsverordnung), BAnz AT 3 May 2017 V 1, p. 2.