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As business in the U.S. came to a halt in the days after the Sept. 11 terrorist attacks, Germany saw two deals that may be a harbinger of stepped-up M&A activity. On Sept. 11, ball-bearing manufacturer INA-Holding Schaeffer KG made a surprise $608 million bid for rival FAG Kugelfischer Georg Sch�fer AG. The next day Schroder Ventures and Goldman Sachs Capital Partners agreed to buy Cognis, the specialty chemicals arm of Germany’s Henkel KGaA, for $2.4 billion. The deals reflect the changes in the German industrial sector that have led Anglo-American LBO funds to eye Germany for years. Impending legal changes may facilitate their move into that country. A new German law that goes into effect on Jan. 1 will greatly reduce capital gains taxes on sales of subsidiaries by corporations. Currently, companies that sell a subsidiary may have to pay a capital gains tax of as much as 50 percent, says Maximilian Schiessl, a partner of Hengeler Mueller in Dusseldorf. Under the new regulations, tax rates will fall substantially, though the precise rate will vary by deal. Also on Jan. 1, a new German takeover code will make it easier to purchase publicly held companies.

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