Effects of the recent AWV amendment on international transaction practice

The back­ground to the change in admi­nis­tra­tive prac­tice is likely to be not least the public debate that has been going on since the KUKA take­over by the Chinese MIDEA Group or the ulti­m­ately failed take­over of AIXTRON by Grand Chip Invest­ment about the feared sell-off of key Euro­pean tech­no­lo­gies and know-how.

In parti­cu­lar, the Fede­ral Minis­try for Econo­mic Affairs and Energy views with skep­ti­cism tran­sac­tions in which a foreign inves­tor, with the help of dome­stic subsi­dies, makes targe­ted offers for German key tech­no­lo­gies that signi­fi­cantly exceed the actual market value of the target, so that the assump­tion of state-control­led buying up of know-how is obvious.
Accor­ding to the BMWi, it is inten­ded to be able to better protect key tech­no­lo­gies also in the area of civil secu­rity-rela­ted tech­no­lo­gies in view of the incre­asing number and comple­xity of acqui­si­tion tran­sac­tions with non-EU participation.

It is poin­ted out that non-Euro­pean econo­mies often deal with foreign invest­ments (inclu­ding German invest­ments) in a much more rest­ric­tive manner. This leads to unequal compe­ti­tive condi­ti­ons and puts German compa­nies at a disad­van­tage. China is regu­larly cited as an exam­ple country.

In the future, a focus will be placed on tran­sac­tions in which compa­nies are acqui­red that operate so-called “criti­cal infra­struc­tures,” that deve­lop indus­try-speci­fic soft­ware for the opera­tion of “criti­cal infra­struc­tures,” that are entrus­ted with regu­la­tory moni­to­ring measu­res, that provide cloud compu­ting services of a certain size, or that are quali­fied as key compa­nies for tele­ma­tics infra­struc­ture products. In addi­tion, further key defense tech­no­lo­gies are to be subject to exami­na­tion by the BMWi in the future with regard to a possi­ble threat to essen­tial secu­rity inte­rests of the Fede­ral Repu­blic of Germany. — This signi­fi­cantly tigh­tens invest­ment control and signi­fi­cantly expands the BMWi’s substan­tive audit powers.

In order to mini­mize the risk of an unde­tec­ted repor­ta­ble tran­sac­tion, it is to be expec­ted that the exami­na­tion of the report­ing obli­ga­tion accor­ding to AWV will be given a signi­fi­cantly higher prio­rity in legal advice than has been the case so far.

Due to the large number of impon­der­a­bles, the 9th Ordi­nance Amen­ding the Foreign Trade and Payments Ordi­nance does not repre­sent a satis­fac­tory solu­tion for tran­sac­tion prac­tice, since ulti­m­ately, despite the high hurd­les, the possi­bi­lity of prohi­bi­ting an acqui­si­tion has remained unch­an­ged. — In contrast, consul­ting costs and legal uncer­tainty increase consider­a­bly for the investor.

About Florian Hirschmann
Florian Hirsch­mann advi­ses clients on corpo­rate law, in parti­cu­lar on natio­nal and inter­na­tio­nal private equity and M&A tran­sac­tions, venture capi­tal and joint ventures. — Florian Hirsch­mann is also co-head of the China Desk at DLA Piper. In this context, he and his German-Chinese team have exten­sive expe­ri­ence in China-rela­ted manda­tes, in parti­cu­lar with Chinese inves­tors in Germany as well as joint ventures of German compa­nies in China or M&A transactions.

Prior to joining DLA Piper in 2014, Florian Hirsch­mann worked for seve­ral years as a part­ner for a well-known Ameri­can and, before that, a leading English and Ameri­can law firm in Munich and Frankfurt.

About DLA Piper
As a global law firm, DLA Piper advi­ses compa­nies, finan­cial insti­tu­ti­ons and public autho­ri­ties in all areas of natio­nal and inter­na­tio­nal busi­ness law at its offices. Our clients bene­fit at all times from a global network, compre­hen­sive exper­tise and our full-service approach. We focus on global strength through local compe­tence. We have 500 employees in Germany, of which over 200 are attor­neys and appro­xi­m­ately 60 have part­ner status. Four German offices in Frank­furt am Main, Hamburg, Colo­gne and Munich. Loca­ti­ons in Asia, Austra­lia, Europe, Latin America, the Middle East and the USA. Over 9,200 employees at more than 90 loca­ti­ons in over 40 count­ries worldwide.