Comprehensive legal advice on M&A transactions
In the context of mergers & acquisitions (M&A), the question regularly arises whether an asset deal or share deal is the better approach when buying a business. Both variants entail different legal, tax, and practical consequences. The asset deal, in particular, brings employment law challenges that companies and acquirers should consider.
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 intact. Unlike the share deal, where the buyer acquires the shares of the company, the asset deal can be more precisely tailored and limited to specific parts of the business, according to the commercial law firm MTR Legal Rechtsanwälte, which has extensive experience in M&A transactions.
Less risk, more effort
The asset deal offers the advantage of being able to more specifically exclude risks from unknown liabilities of the company. A disadvantage, however, is that the effort involved in an asset deal is greater than in a share deal, as each asset must be individually transferred and contractually regulated.
Moreover, 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 simultaneously offers opportunities to optimize existing business relationships.
Transfer of business under § 613a BGB
A central issue in an asset deal is the so-called transfer of business. This means that, when a business or part of a business is sold, all employees employed there automatically transfer to the new owner with their existing employment contracts in accordance with § 613a BGB.
The transfer of business under § 613a BGB means that the buyer enters into all employment relationships that existed at the time of the transfer. The employment relationships continue practically 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 brings a change in employer, among other things, they have the right to object to the transfer of their employment relationships. This right of objection must be exercised within one month after proper information. If information about the transfer is missing or incorrect, the objection period does not begin, allowing employees to exercise their right of objection even months later. This can have significant consequences for both the buyer and seller. Faulty information includes incomplete details about the buyer’s identity, 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 under § 111 of the Works Council Constitution Act (BetrVG). Thus, the employer must negotiate a reconciliation of interests with the works council. If the parties cannot reach an agreement, this can delay the M&A transaction, which is generally not in the interest of the buyer or seller. If necessary, a social plan must also be drawn up to offset economic disadvantages for employees.
Data protection in asset deal
The transfer of employee, customer, or supplier data in the context of an asset deal poses a challenge from a data protection perspective. According to the General Data Protection Regulation (GDPR), the transfer of personal data without consent is generally impermissible—unless there is a legal allowance, such as in the context of business transfer.
Data protection aspects are particularly delicate during due diligence. Information about employees is often only allowed to 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 integrate data protection early into the deal structure and establish clear regulations in the purchase agreement.
Asset deal is complex
An asset deal offers many benefits—especially in terms of targeted acquisition of specific business assets and risk management. However, it is legally and practically much more complex than a share deal. Therefore, both buyers and sellers are well advised to seek legal and tax advice early on and carefully inform all affected parties.
MTR Legal Rechtsanwälte advises on M&A transactions as well as throughout the Corporate law across Germany.
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