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German family-owned businesses continue to face a period of upheaval. In many cases, succession is on the horizon. But the next generation isn’t always ready to take over. In such cases, the continuity of the business can only be ensured through a solution outside the family—whether through managers from outside the family via a management buyout (MBO) or through an outside third party as the buyer.
If a third party acts as the buyer, the acquisition can quickly take on an international dimension. This is because the transaction market has become international, and as a result, foreign buyers—whether strategic or financial investors—are increasingly stepping in as successors to German family-owned businesses.
Every international M&A transaction presents unique challenges that do not arise in purely domestic transactions.
1. Language
The first challenge is language. International transactions are conducted in English in nearly all cases. This applies to all aspects, such as due diligence, negotiations, and contractual documents. This increases the complexity for German sellers because the contractual documents—which are already difficult to understand—are not written in their native language. Therefore, it is important to be supported by legal advisors who are not only experienced in M&A transactions but also well-versed in the international dimension. Business-level English is essential, and the advisor must also act as a linguistic intermediary for the German seller.
2. Culture
In M&A transactions, the negotiating parties rarely have the opportunity to get to know each other in depth. The key is to build mutual trust as quickly as possible in order to overcome even difficult negotiation situations. In the international arena, cultural differences come into play, whether within Europe or when dealing with America or Asia. Here, it is important to be sensitive and to put yourself in the other party’s shoes.
These cultural differences persist even after the transaction is successfully closed and can pose a challenge when the German family-owned business is to be integrated into a foreign corporate group (the so-called post-closing phase). It is crucial to identify communication problems, language barriers, mistrust, and resistance to change as quickly as possible and to resolve them carefully. Many transactions fail during this phase, which is why it is particularly critical to success. Key factors here include soft skills, intercultural competence, realistic synergy planning, and legal due diligence.
3. In-Person Meetings
In international M&A transactions, in-person meetings are of particular importance. They help bridge cultural differences, build trust, and clear up misunderstandings early on. Especially in transnational negotiations, where different business mindsets, communication styles, and expectations come together, face-to-face meetings are often the key to success. They enable a better understanding of each company’s culture, create a personal foundation for collaboration, and significantly facilitate subsequent integration.
Virtual meetings are certainly efficient. However, they cannot fully replace the nuances of human interaction, especially when it comes to sensitive topics such as oversight, leadership, or personnel decisions. Early-stage face-to-face exchanges at the decision-maker level can therefore play a crucial role not only in closing international transactions but also in ensuring their long-term success.
4. Contract Drafting
Although a uniform standard for contract drafting in M&A transactions has increasingly established itself internationally, legal differences still exist in various areas. Contracts in common law jurisdictions (the United Kingdom, the United States), for example, are characterized by long sentences with numerous overlaps and repetitions. The sheer length of these contracts also never ceases to amaze even experienced German legal advisors; this is all the more true for German family-owned businesses acting as sellers. It is therefore important not to be daunted by this, but rather to draw on existing international experience to identify and resolve the key economic issues.
5. Foreign Trade Law
When a foreign buyer acquires a German family-owned business, German foreign trade law plays a central role, particularly in the context of investment reviews. If a company from a non-EU country wishes to acquire shares in a German company, the Federal Ministry for Economic Affairs and Energy may review whether the transaction poses a threat to public order or security in Germany. This is particularly relevant for companies operating in critical infrastructure, security, or defense sectors. The review may result in conditions being imposed or, in exceptional cases, a prohibition on the acquisition.
6. Formal Requirements
The formal challenges arising from international M&A transactions should not be overlooked either. In particular, if a notary or the commercial register is involved in the transaction on the German side, the foreign parties must provide certified proof of existence and representation. These documents must generally also be accompanied by an “apostille” or legalization. These requirements must be factored into the timeline, as fulfilling them often takes longer than anticipated.
7. Governing Law
In purely domestic transactions, the question of which law applies does not arise. The situation is different for cross-border transactions, where at least two legal systems conflict with one another. Therefore, in such cases, it is strongly recommended to specify the applicable law in the contracts themselves. From the perspective of a German seller, German law is the obvious choice. It can often be enforced as well, since the entire company is subject to the German legal system and a foreign buyer must therefore consult German legal counsel from the outset.
8. Jurisdiction
Additionally, the question arises as to where and by whom any subsequent legal dispute between the parties is to be resolved. Options include state courts and arbitration tribunals. If German law is agreed upon, a court in Germany would be the obvious choice. However, this is not certain. Often, each party seeks to designate a court in its own home country. A neutral location, such as Switzerland, may offer a solution.
9. Conclusion: Challenges Are Not Obstacles
Looking beyond Germany’s borders opens up valuable opportunities in the search for suitable business successors. International prospects not only expand the pool of potential buyers but also significantly increase the chances of a profitable sale. The associated challenges—such as cultural differences, legal frameworks, or communication barriers—are by no means insurmountable. The key is to identify them early on and address them professionally.
