Private Legal Transplants in Negotiated Deals

Anglo-American transactional practice has had an enormous influence on deals practice in continental Europe in recent years. Pre-contractual practices and typical contract clauses have been decentrally adopted into European transactional practice on a broad scale. Yet, while continental private practice has widely assimilated Anglo-American transactional concepts terminologically, identity in terminology does not necessarily imply identity in function and meaning. As is well-known from the more general “legal transplant”-literature, function and meaning of foreign concepts can change as they are being integrated into a different legal system, especially where important systemic differences persist. One important difference between the US and continental European dealmaking environments regarding public deals is the degree to which competition for firms, and the idea to subject transactions negotiated with the management of a public corporation to a “market check”, is encouraged by culture and law. Different attitudes towards the balance between the goals of creating a market for firms and of transactional certainty can significantly change the way particular M & A practices work. Against this background, this paper analyzes the adoption of three broadly-used M & A practices into German practice: letters of intent, breakup fees, and material adverse change clauses, and compares their meaning and function in the US and in Germany. It results that important differences persist. In the longer run, the adoption of Anglo-American deals practices may, however, well change the way markets for firms work in Germany.