Sales and Purchase Agreements

German Corporate and Contract Lawyers

Sales and Purchase Agreements

German Corporate and Contract Lawyers

Sale and purchase agreements are vital in a successful M&A transaction and the purchase and sale of smaller businesses. This agreement is a legally binding contract that presents the conditions of the sale and purchase of a company. It creates the framework by which the sale can be concluded; therefore, it needs to be very carefully drafted.

Negotiating the tricky world of German corporate law means that working alongside experienced and reliable legal professionals is vital to drafting sale and purchase agreements suited to your enterprise’s interests. This rule applies regardless of the size of your business.

At Schlun & Elseven Rechtsanwälte, our corporate law team supports you in all matters relating to sale and purchase agreements in Germany. As your legal partner, we aim to ensure your goals are central to our negotiating position. We have experience working on both sides of such negotiations, which allows us to have a deep understanding of the other side’s motivations.

Please, do not hesitate to contact us to work with our dedicated corporate and contract law teams.

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Preparation for the Sale and Purchase Agreement

Careful preparation is vital to a successful transaction. At Schlun & Elseven Rechtsanwälte, our lawyers will carefully prepare for the arrangement. We will draft the letter of intent for buyers and any non-disclosure agreements applicable to the transaction. In M&As, we have acted on behalf of both buyers and sellers and from our experience, meticulous due diligence is vital for both sides to conduct. This due diligence needs to assess all aspects of the firm – legal, financial and technical aspects. Our team performs thorough due diligence, which will analyse all of the critical assets and liabilities of the selling firm, including their intellectual property, such as copyright and trademarks.

The risks involved in the arrangement must be brought to light for both buyers and sellers. Our lawyers regularly carry out risk assessments, which play a significant role in designing warranties and indemnities during the sale and purchase agreement. The selling company should carefully assess the creditworthiness of the buying company. This ensures that they can deliver what they promise.

Should it be decided to carry on with the transaction, it needs to be assessed how the deal will be brokered and whether it will occur by a share deal or an asset deal. How the transaction will be completed has a crucial influence on the final sale and purchase agreement.

Regardless of whether you are the buying or selling partner in a transaction, our full-service approach will provide you with the legal counsel you need to prepare for an M&A transaction.

Vital Elements of a Sale and Purchase Agreement

When designing a sale and purchase agreement, it is vital to determine the most important elements involved. These elements are where most of the disagreements arise during these negotiations.

Purchase Price

When determining the value of an enterprise, there must be clarity as to how the final purchase price was reached. On behalf of clients who are selling, our lawyers will carefully examine how purchasers have concluded with the price offered.

A meticulous analysis of the method used, and the purchaser’s conclusions will determine whether the price offered is fair. For clients on the buying end of the sale and purchase agreement, our lawyers will conduct the required due diligence and provide your company with a framework by which the actual value of the selling firm can be accurately assessed.

As a full-service law firm, our German business lawyers blend their knowledge from different areas to provide you with the required insight. From assessing fixed assets and balance sheet analysis to intellectual property due diligence, our legal team will transparently evaluate the company to find the value of the purchase.

Our lawyers will carefully draft and analyse the sales and purchase agreement. The final fee will not be reached or concluded until all aspects have been carefully examined.

Terms of Payment

The price itself is one important aspect, but how the payment will be made is another matter. In this case, the goals of the selling party and the buying party can be far apart. Having expert negotiators in your corner is crucial for ensuring that your aims are properly represented in such negotiations. As a seller, the security and reliability of payment will feature high on the priorities, whereas more flexible payment terms may be key for buyers.

Our lawyers have represented both sides in such agreement negotiations and are perfectly placed to determine what is achievable in these negotiations. We will represent your interests in a transparent manner and outline what is achievable within the framework of the sale and purchase agreement.

Restrictions within the Sales and Purchase Agreement

For buyers in the sale and purchase agreement negotiations, maintaining the value of their purchase can be a priority in their future success. Protecting this value may involve placing certain restrictions on the seller, such as limiting the opening of a competing enterprise.

Such restrictions can prevent the seller from opening a company within a specific time limit or geographical area. It can also prevent them from soliciting their previous company’s customers and employees.

It should be noted that these matters are carefully regulated under competition and antitrust law. Breaching competition law can lead to costly legal battles, which should be avoided whenever possible. Our legal team is well-versed in German and European competition law and will ensure that your agreement does not breach such provisions.

Warranties and Indemnities

Within the sale and purchase agreement, warranties are placed by the seller concerning the state of the company being sold. The warranties need to be carefully examined as if they are subsequently proven to be untrue; the buyer may have a claim for breach of warranty. In a sale and purchase agreement, these warranties should cover all company areas, including its assets, contracts, employees, property, intellectual property, copyrights and debt.

Careful analysis must be carried out during the due diligence process. Our lawyers will determine whether the warranties cover the risks of buying that specific company. As contract lawyers, our team will closely examine the sale and purchase agreement and ensure that any warranties and indemnities within the agreement fulfil your enterprise’s goals.

Seller involvement in the Company Following Sale

Following a successful sale, there tends to be a transition period between the new owners coming in and the sellers moving on. This allows the seller to introduce the buyer and the new reality to their customers, employees and other interested parties. However, this period needs to be carefully managed. The agreement should clearly outline the time limit, set duties and the conditions of their involvement.

Determining the right amount of involvement can be a tricky task. Consulting with our experienced corporate lawyers allows us to advise you based on what we have seen in the past. Our lawyers will assess the situation and determine whether the seller should be involved in this transition period and to what degree their involvement is needed.

Implementation of the Sale/Purchase

The sale and purchase agreement should also clearly regulate when the transfer of ownership should officially occur. The signing of the agreement may not be the time when the implementation of the agreement occurs. Similarly, there should be agreements reached on what happens in the period between the handover of ownership. For buyers, this is an important time as mistakes made in the terms of the agreement may lead to the company’s value decreasing during this vital transition phase.

Our legal professionals will ensure that these points and other vital implementation points are carefully considered.

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