Mergers and acquisitions (M&A)

Mergers and acquisitions: from initial contact to closing

A merger or acquisition is not a linear process, but an interplay of legal, tax, commercial, and human factors. Good guidance makes the difference between a smooth transaction and a file that leads to disputes years later regarding guarantees, earn-outs, or employee positions. We guide M&A processes for SME entrepreneurs, family businesses, private equity firms, strategic buyers, listed companies, and foreign investors.

Who do we work for?

We assist both buyers and sellers. Our clients include owner-managers selling their companies, MBO and MBI teams acquiring the company, strategic buyers gaining market share, private equity firms and family offices, independent investors and management investors, listed companies in bolt-on acquisitions, and shareholders in carve-outs and spin-offs. Additionally, we regularly assist management teams with defining their post-transaction positions (Management Equity Plans, vesting, leaver clauses).

Share transaction or asset and liability transaction?

The choice between a share deal and an asset deal is fundamental. In a share deal, the buyer acquires the shares in the target company, along with all associated rights, obligations, and (historical) liabilities. In an asset deal, specific assets and liabilities are transferred, requiring more customization but also entailing an administrative burden. From a tax perspective, the two forms differ significantly: real estate transfer tax, VAT on the transfer of a going concern (Article 37d of the 1968 VAT Act), the treatment of goodwill, and the applicability of the Business Succession Scheme (BOR) and the Rollover Relief Scheme (DSR).

The transaction process

NDA and initial exploration

A Non-Disclosure Agreement is typically entered into before information is exchanged. Key considerations include the scope, duration, exceptions (publicly available, proprietary knowledge, legal obligation), and the consequences of a breach.

Letter of Intent or term sheet

The Letter of Intent (LOI) or term sheet sets out the main outlines of the intended transaction: purchase price or valuation method, transaction structure, due diligence, exclusivity, duration, and any suspensive conditions. Although an LOI is in principle not binding, it often contains binding elements (confidentiality, exclusivity, cost allocation). A carelessly drafted LOI can seriously hinder subsequent negotiations.

Due diligence

Due diligence is the investigation conducted by the buyer to identify risks and align transaction terms accordingly. Legal due diligence assesses corporate documentation, articles of association, shareholders' agreements, substantive contracts, employment contracts and pension schemes, permits, ongoing litigation, intellectual property, real estate, financing, collateral, GDPR and AML compliance, and (where necessary) environmental, IT security, and sector-specific regulations. Tax due diligence runs in parallel.

Purchase Agreement (SPA)

The purchase agreement (Share Purchase Agreement or asset and liability agreement) is the heart of the transaction. Important components include the purchase price mechanism (locked box of completion accounts), any earn-out, purchase price adjustments, warranties and indemnities, standard of knowledge, materiality thresholds and liability caps, escrow arrangements, MAC clause, non-competition and confidentiality, and penalty clauses. The allocation of warranties and indemnities between buyer and seller is typically the subject of rigorous negotiation.

Signing, closing and post-closing

Signing and closing often take place simultaneously in SME transactions, but can also be separated (split signing/closing) in transactions with suspensive conditions (competition clearance, financing, third-party consents). Post-closing, topics such as integration, final settlement, escrow release, and potential non-compliance with warranties are of importance.

Employees and Works Council

In the case of a share transaction, the employer does not change in principle, and Article 7:662 of the Dutch Civil Code (transfer of undertaking) does not apply. In the case of an asset and liability transaction, however, it often qualifies as a transfer of undertaking, involving the automatic transfer of employees while retaining their rights and obligations. The Works Council has the right of advice pursuant to Article 25 of the Works Councils Act regarding important decisions, including the transfer of control. For some transactions, the SER merger conduct rules are also relevant.

Tax aspects

From a tax perspective, a share transaction differs from an asset-liability transaction in almost all respects. When shares are sold by a natural person, substantial interest (Box 2) applies; when sold via a holding company, the participation exemption applies. Asset-liability transactions involve VAT (Article 37d of the VAT Act regarding the transfer of a going concern), real estate transfer tax, and the tax treatment of goodwill. Under certain conditions, the Business Succession Scheme (BOR) and the Roll-over Relief Scheme (DSR) can significantly reduce the tax burden associated with business succession.

Our working method

You get a dedicated team, a clear budget, and realistic expectations. We think ahead: what happens if the counterparty encounters financial difficulties after closing, how is the earn-out practically settled, and which documentation guides subsequent warranty claims? Our experience with post-transaction disputes helps to document more precisely upfront—not to complicate the transaction, but rather to prevent future conflicts.

Merger or acquisition: the legal forms

In common parlance, 'merger' and 'acquisition' are used interchangeably, but legally they differ. In an acquisition, one party takes control of another company (via shares or assets), after which both legal entities continue to exist. In a true merger, companies are combined. In practice, there are three main forms:

• Share merger – the shares (or a majority interest) are contributed to or transferred to another company, which thereby acquires control. Both companies continue to exist. This form is not regulated separately by law and is structured contractually.
• Business merger – the assets and liabilities of one company are transferred separately to the other. Both companies continue to exist. This form also derives from contract law; for tax purposes, the business merger facility may apply under certain conditions.
• Legal merger – regulated in Article 2:309 of the Dutch Civil Code. The assets of one or more disappearing legal entities are transferred by universal title to the acquiring legal entity, which legally takes the place of the disappearing legal entity. This can be an existing company acquiring the assets, or a company newly established during the merger. The legal merger involves strict procedural requirements, including a merger proposal, an auditor's report, filing, a period for creditors to object (Article 2:316 of the Dutch Civil Code), and notarial formation.

The choice between these forms – and the trade-off with the previously discussed share deal or asset deal – depends on tax implications, liability, employee participation, and the desired final structure. We advise on matters ranging from the international group restructuring a subsidiary to the baker on the corner merging his business with that of a colleague.

Competition supervision: notification to the ACM or the European Commission

A merger or acquisition may constitute a concentration that must be notified in advance to the Authority for Consumers & Markets (ACM). Pursuant to the Competition Act (Articles 26 to 49), a notification obligation applies when the undertakings involved together achieve a worldwide annual turnover of €150 million or more and at least two of them each have a turnover in the Netherlands of €30 million or more. Above higher European thresholds, the European Commission, rather than the ACM, is competent pursuant to the EU Merger Regulation.

If notification is required, the transaction may only be completed after approval. During a four-week notification phase, the ACM assesses whether the concentration would significantly impede effective competition; in complex cases, a thirteen-week authorization phase follows. The ACM can approve a concentration, approve it subject to conditions (remedies, such as the divestment of assets), or prohibit it. Anyone who ignores the notification requirement or completes the transaction before approval (so-called gun jumping) risks substantial fines. Supervision may also come into play below the thresholds if an acquirer holds a dominant position. We assess early in the process whether notification is required and, if applicable, incorporate a competition-suspensive condition into the purchase agreement.

Mergers and acquisitions within corporate law

Mergers and acquisitions form part of our broader Corporate Law. A transaction rarely stands alone: ​​it touches upon corporate governance, the relationship between shareholders and thereby shareholder disputes, and, in the event of financial headwinds, upon restructuring, insolvency, and bankruptcy. Because MKB Juristen works with mixed teams of lawyers and in-house counsel, we monitor the transaction in conjunction with these surrounding matters – for the international group just as much as for the entrepreneur around the corner.