Effects of the recent AWV amendment on international transaction practice
The background to the change in administrative practice is likely to be not least the public debate that has been going on since the KUKA takeover by the Chinese MIDEA Group or the ultimately failed takeover of AIXTRON by Grand Chip Investment about the feared sell-off of key European technologies and know-how.
In particular, the Federal Ministry for Economic Affairs and Energy views with skepticism transactions in which a foreign investor, with the help of domestic subsidies, makes targeted offers for German key technologies that significantly exceed the actual market value of the target, so that the assumption of state-controlled buying up of know-how is obvious.
According to the BMWi, it is intended to be able to better protect key technologies also in the area of civil security-related technologies in view of the increasing number and complexity of acquisition transactions with non-EU participation.
It is pointed out that non-European economies often deal with foreign investments (including German investments) in a much more restrictive manner. This leads to unequal competitive conditions and puts German companies at a disadvantage. China is regularly cited as an example country.
In the future, a focus will be placed on transactions in which companies are acquired that operate so-called “critical infrastructures,” that develop industry-specific software for the operation of “critical infrastructures,” that are entrusted with regulatory monitoring measures, that provide cloud computing services of a certain size, or that are qualified as key companies for telematics infrastructure products. In addition, further key defense technologies are to be subject to examination by the BMWi in the future with regard to a possible threat to essential security interests of the Federal Republic of Germany. — This significantly tightens investment control and significantly expands the BMWi’s substantive audit powers.
In order to minimize the risk of an undetected reportable transaction, it is to be expected that the examination of the reporting obligation according to AWV will be given a significantly higher priority in legal advice than has been the case so far.
Due to the large number of imponderables, the 9th Ordinance Amending the Foreign Trade and Payments Ordinance does not represent a satisfactory solution for transaction practice, since ultimately, despite the high hurdles, the possibility of prohibiting an acquisition has remained unchanged. — In contrast, consulting costs and legal uncertainty increase considerably for the investor.
About Florian Hirschmann
Florian Hirschmann advises clients on corporate law, in particular on national and international private equity and M&A transactions, venture capital and joint ventures. — Florian Hirschmann is also co-head of the China Desk at DLA Piper. In this context, he and his German-Chinese team have extensive experience in China-related mandates, in particular with Chinese investors in Germany as well as joint ventures of German companies in China or M&A transactions.
Prior to joining DLA Piper in 2014, Florian Hirschmann worked for several years as a partner for a well-known American and, before that, a leading English and American law firm in Munich and Frankfurt.
About DLA Piper
As a global law firm, DLA Piper advises companies, financial institutions and public authorities in all areas of national and international business law at its offices. Our clients benefit at all times from a global network, comprehensive expertise and our full-service approach. We focus on global strength through local competence. We have 500 employees in Germany, of which over 200 are attorneys and approximately 60 have partner status. Four German offices in Frankfurt am Main, Hamburg, Cologne and Munich. Locations in Asia, Australia, Europe, Latin America, the Middle East and the USA. Over 9,200 employees at more than 90 locations in over 40 countries worldwide.