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Mergers and acquisitions in Germany: Social-setting and regulatory framework

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  • Schmid, Frank A.
  • Wahrenburg, Mark

Abstract

The paper describes the legal and economic environment of mergers and acquisitions in Germany and explores barriers to obtaining and executing corporate control. Various cases are used to demonstrate that resistance by different stakeholders including minority shareholders, organized labour and the government may present powerful obstacles to takeovers in Germany. In spite of the overall convergence of European takeover and securities trading laws, Germany still shows many peculiarities that make its market for corporate control distinct from other countries. Concentrated share ownership, cross shareholdings and pyramidal ownership structures are frequent barriers to acquiring majority stakes. Codetermination laws, the supervisory board structure and supermajority requirements for important corporate decisions limit the execution of control by majority shareholders. Bidders that disregard the German preference for consensual solutions and the specific balance of powers will risk their takeover attempt be frustrated by opposing influence groups.

Suggested Citation

  • Schmid, Frank A. & Wahrenburg, Mark, 2003. "Mergers and acquisitions in Germany: Social-setting and regulatory framework," CFS Working Paper Series 2003/28, Center for Financial Studies (CFS).
    • Handle: RePEc:zbw:cfswop:200328
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    References listed on IDEAS

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    1. Gary Gorton & Frank Schmid, 2000. "Class Struggle Inside the Firm: A Study of German Codetermination," Center for Financial Institutions Working Papers 00-36, Wharton School Center for Financial Institutions, University of Pennsylvania.
    2. Franks, Julian & Mayer, Colin, 2001. "Ownership and Control of German Corporations," The Review of Financial Studies, Society for Financial Studies, vol. 14(4), pages 943-977.
    3. Kenji Kojima, 2000. "Commitments and Contests: a Game-Theoretic Perspective on Japanese Vertical Relationships," Discussion Paper Series 110, Research Institute for Economics & Business Administration, Kobe University.
    4. Gorton, Gary & Schmid, Frank A., 2000. "Universal banking and the performance of German firms," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 29-80.
    5. Boehmer, Ekkehart, 2000. "Business Groups, Bank Control, and Large Shareholders: An Analysis of German Takeovers," Journal of Financial Intermediation, Elsevier, vol. 9(2), pages 117-148, April.
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    Cited by:

    1. Goergen, Marc & Manjon, Miguel C. & Renneboog, Luc, 2008. "Recent developments in German corporate governance," International Review of Law and Economics, Elsevier, vol. 28(3), pages 175-193, September.
    2. Marc Goergen & Miguel Manjon & Luc Renneboog, 2008. "Is the German system of corporate governance converging towards the Anglo-American model?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 12(1), pages 37-71, March.

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    More about this item

    Keywords

    Mergers and Acquisitions; German Corporate Governance System;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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