The appetite in the market for public takeovers is getting stronger in Germany. Shortly after the German Takeover Act was enacted in 2002, almost all takeovers in Germany were coordinated upfront with both major shareholders and the management of the target; they typically ended with acceptance levels well above 75% – or even 95% – of the shares. The latter threshold is required for a squeeze-out of the remaining minority shareholders which had been permitted by a new law which was also enacted in 2002. At least in concept, the 75% threshold is relevant under German corporate law for structural measures such as a merger or the implementation of a domination and profit transfer agreement, which is necessary to establish a fiscal unity between the acquirer and the target for tax purposes. In the event of a leveraged financing, the 75% threshold is also of specific importance from the perspective of the financing banks, because the most common acquisition structures involve such structural measures in order to allow the provision of upstream security as well as access to the cash flow of the target.
But times have changed dramatically since 2002. Now, we see hedge funds appearing almost immediately on the scene after a takeover is announced. It has therefore become difficult for a bidder to achieve the high acceptance levels of the past. At the same time, financing banks have become comfortable with lending money, even for the acquisition of a 50%-plus-one share stake with a view to more sophisticated debt push-down concepts recently developed, which usually involve a super dividend to be distributed by the target following the takeover. Even more importantly, due to significantly larger private equity funds and strategic investors now having considerable war chests at their disposal, large targets are becoming a greater focus of potential takeovers.
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