Considerations and Best Practices for Cross-Border M&A Transactions

At the outset, a pivotal structuring question arises that typically does not feature in purely domestic deals: the choice of governing law (the contract statute). For the contractual aspects of a share or asset purchase agreement, the Rome I Regulation permits a broad choice of law without requiring a close nexus. Limits must nevertheless be observed, including mandatory domestic law in domestic or internal market scenarios, and employee participation and co-determination rights.

At first glance, international due diligence does not fundamentally differ from domestic due diligence.  Core review areas – corporate, contracts, IP/IT, regulatory, employment, litigation, real estate, and tax – remain the same but must be adapted to local law and practice. Cross-cutting risks such as antitrust, sanctions, and anti-corruption/compliance typically warrant analysis across all targets or the entire group, as they can be liability- and reputation-relevant irrespective of local economic weight. The reporting architecture – jurisdiction- versus topic-based – should be aligned with management and any financing partners and insurers (W&I).

In international M&A, assets, contracts, and employees are often spread across multiple jurisdictions. This argues for a two-tier setup: a comprehensive framework agreement that sets out all essential terms in a framework/umbrella agreement, benefiting from broad flexibility on governing law under conflict-of-law principles; and local implementation schedules that effect completion in accordance with mandatory local substantive and formal law, including registry filings, notarization requirements, and regulatory approvals. Close coordination between Lead Counsel and Local Counsel is essential here, as the local implementation documents must be harmonized across teams prior to signing the framework purchase agreement.

The perfection of title – the actual transfer of shares, assets, and rights – is subject to stringent local formalities that cannot be displaced by choice of law. Depending on the jurisdiction, various steps may be required: entries in commercial and land registers, notarial deeds, regulatory approvals (e.g., merger control clearances, foreign investment reviews), third-party consents (e.g., change-of-control clauses), and compliance with employee information and consultation obligations. Coordinating timing across jurisdictions is critical, particularly where economic and legal closing are staggered, or simultaneous completion in several countries is required.

Best Practice: Use the two-tier structure – framework agreement plus local implementation schedules –​ to set uniform standards while accommodating local specifics. Prepare a detailed closing checklist with all requisite steps per jurisdiction and identify critical paths. Coordinate documentation in parallel, not sequentially, and fully prepare all closing deliverables to avoid delays.

The validity of declarations hinges on proper authority. Local requirements must be observed, which can vary significantly even among European countries depending on the place of use or the principal’s habitual residence. Form and evidentiary matters – notarization, apostille, legalization, and translations – must be determined for each jurisdiction. Corporate representation is governed by the applicable corporate statute.

Best Practice: Compile an early inventory of all necessary powers of attorney and their formal requirements for each involved jurisdiction. Allow sufficient time for notarizations, apostilles, and administrative procedures, which may take several weeks. Carefully verify the signing authority of signatories on both sides.

International transactions present distinct tax challenges. Tax structuring materially affects deal economics and requires a holistic assessment of all relevant jurisdictions. Key aspects include the tax characterization of the transaction (asset deal versus share deal), transfer pricing for intra-group transactions, treatment of loss carryforwards and tax provisions, and potential withholding taxes on dividends, interest, and royalties. Double tax treaties between the relevant states must be analyzed to prevent double taxation.

Particular attention is warranted for exit taxation in seat relocations, pre- or post-closing reorganizations, and legacy tax risks identified in tax due diligence. In carve-out scenarios, assess the tax consequences of the separation, including hidden profit distributions and the tax treatment of transfer pricing for shared services. The financing structure – equity, debt, or hybrid instruments – has significant tax implications for interest deductibility and the effective tax burden.

Best Practice: Involve tax advisers with international expertise at the structuring stage. Model alternative structures and their tax implications for both buyer and seller. Allocate tax risks through appropriate representations, warranties, and indemnities in the purchase agreement and consider tax rulings or clearance procedures for complex matters.​