Comprehensive legal advice on M&A transactions
In corporate acquisitions within the framework of Mergers & Acquisitions (M&A), the question regularly arises whether an asset deal or share deal is the better approach. Both variants bring different legal, tax, and practical implications. The asset deal, in particular, presents labor law challenges that companies and acquirers should pay attention to.
In an asset deal, the buyer acquires individual assets of a company, such as machinery, real estate, inventory, or customer contracts. The company itself remains in existence. Unlike a share deal where the buyer acquires the company’s shares, an asset deal can be more precisely tailored and limited to certain divisions, as noted by the law firm MTR Legal Rechtsanwälte, which has extensive experience in M&A transactions.
Less risk, more effort
The asset deal offers the advantage that risks from unknown liabilities of the company can be more selectively excluded. A disadvantage, however, is that the effort in an asset deal is higher than in a share deal, as each asset position must be individually transferred and contractually regulated.
Furthermore, each individual contract, whether with customers, suppliers, or rental partners, may need to be newly concluded or assigned. This makes the transaction complex and time-consuming, but it also offers opportunities to optimize existing business relationships.
Transfer of business pursuant to § 613a BGB
A central issue in an asset deal is the so-called transfer of business. This means that upon the sale of a business or a part of a business, all employees employed there automatically transfer to the new owner with their existing employment contracts according to § 613a BGB.
The transfer of business under § 613a BGB results in the buyer entering into all employment relationships that existed at the time of the transfer. The employment relationships continue virtually unchanged. This also applies to the agreed salary, vacation entitlements, company pension, and other contractual arrangements.
Employees must be informed about the transfer of business in an asset deal. As the transfer involves, among other things, a change of employer for them, they have a right to object to the transfer of their employment relationships. They must exercise this right of objection within one month after proper notification. If the information about the transfer is missing or erroneous, the objection period does not start, allowing employees to exercise their right of objection even months later. This can have significant consequences for buyers and sellers. Incorrect information may involve, for example, incomplete details about the identity of the acquirer, the timing of the transfer, or the legal consequences.
Co-determination rights of the works council
If a works council exists, it has co-determination rights in an asset deal according to § 111 Works Constitution Act (BetrVG). Thus, the employer must negotiate an agreement of interests with the works council. If the parties do not reach an agreement, this can delay the M&A transaction, which is usually not in the interest of buyers and sellers. If necessary, a social plan may also need to be created to compensate for economic disadvantages to the employees.
Data protection in the asset deal
The transfer of employee, customer, or supplier data in the context of an asset deal is a challenge from a data protection perspective. According to the General Data Protection Regulation (GDPR), the disclosure of personal data without consent is fundamentally prohibited — unless there is a legal permission, such as in the context of a business transfer.
During due diligence, data protection aspects are particularly sensitive. Information about employees may often only be shared in pseudonymized form. After the transaction, it must also be ensured that all data protection requirements are met during the transfer. Companies should therefore incorporate data protection into the deal structure early on and make clear arrangements in the purchase contract.
Asset deal is complex
An asset deal offers many advantages — especially regarding the targeted acquisition of certain corporate assets and risk management. At the same time, it is, however, significantly more complex legally and practically than a share deal. Both buyers and sellers are therefore well-advised to seek early legal and tax advice and to carefully inform all parties involved.
MTR Legal Rechtsanwälte advises on M&A transactions as well as across the entire company law in Germany.
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