Covenants | Germany | Global Private M&A Guide - Limited External Content

Is a noncompete common?

Frequency/market practice: Very common; typically the seller agrees to enter into a two or three year noncompete undertaking. There are, however, legal limitations to noncompete obligations regarding sellers that hold only a minority share in the target.

Is it common to use waterfall or blue pencil methods to interpret contractual provisions?

Frequency/market practice: Very common; purchase agreements always provide for general severance clauses, which in some cases are enhanced by specific clauses relating to noncompete covenants.

Are nonsolicitation provisions (of employees) common?

Frequency/market practice: Fairly common; typically in conjunction with a noncompete.

Are nonsolicitation provisions (of customers) common?

Frequency/market practice: Rarely used in national transactions because competition law is very restrictive in this regard.

Are seller restrictions usually imposed on the target business between signing the purchase agreement and closing?

Frequency/market practice: Very common; competition law restrictions regarding so-called gun-jumping need to be observed when drafting these restrictions. The buyer's control and influence on the target prior to merger clearance must be limited, in particular the buyer may not interfere with the target’s ordinary course of business.

Is there broad access to books, records and management between signing and closing?

Frequency/market practice: Fairly common; generally yes in private transactions, but subject to competition law restrictions.

Is it common to update warranty disclosure or notify of possible breach?

Frequency/market practice: Rarely.

Global Private M&A Guide - Limited External Content

Germany

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