Company Due Diligence in Germany: Cost-Effective Solutions

Company Due Diligence in Germany

Updated on Tuesday 25th July 2023

Rate this article

based on 1 reviews.

Company Due Diligence in Germany

Potential investors, acquirers, or lenders can perform company due diligence in Germany before conducting any business transactions. This procedure helps assess risks and opportunities by investigating and analyzing a company's financial, legal, operational, and commercial aspects. Performing company due diligence is a recommended practice to make informed decisions based on reliable data, in the case of business transactions, investments, or acquisitions.
Our German lawyers provide company due diligence services to both local and foreign customers.

What is company due diligence and how is it conducted in Germany?

Company due diligence can be defined as a procedure or set of procedures conducted in order to verify a company from one or more points of view. The most effective way of verifying a German company is to perform a research with the local Trade Register or with the European Commercial Register. However, the information obtained from these two institutions are limited to certain information such as details about the shareholders and directors of the company. Certain details about the company’s financial background are also available. However, certain persons or companies need more specific information which is why they appeal to the services of a professional or a law firm in Germany in order to verify all the legal aspects of doing business with a certain company. This is also why company due diligence procedures can be divided into several types.

Types of company due diligence procedures in Germany

The German business environment can provide multiple investment opportunities, which is why company due diligence services have evolved and become quite complex. The following types of company verification procedures are available in Germany:
  • legal due diligence;
  • commercial or operational due diligence;
  • financial due diligence.
Other types of company due diligence existing in Germany may include HR due diligence, intellectual property due diligence, customer due diligence, or administrative due diligence.
Environmental company due diligence is also available for certain industries.
Please get in touch with our lawyers in Germany to see which due diligence option suits your needs. 

Legal due diligence in Germany

Legal due diligence is an important type of company due diligence in Germany, particularly in the case of mergers and acquisitions transactions. 
In this process, both the buyer and seller carefully examine all the legal documents and information related to the company being bought or sold. The purpose is to identify any legal risks or potential liabilities before finalizing the deal. 
Contracts, lawsuits, and details about intellectual property are carefully verified during legal due diligence. This helps them understand any legal issues or liabilities that the target company might have.
This type of company due diligence in Germany usually takes up to 1 to 2 months, depending on each particular case. To facilitate this process and not prolong it, it is important to be well-prepared, in which case we recommend reaching out to our German lawyers for assistance. 

How is commercial due diligence performed in Germany?

Commercial due diligence (CDD) is a specialized type of company due diligence in Germany that assesses a company's strengths, weaknesses, opportunities, and threats in the market.
To gather information, a combination of secondary and primary research methods is used. Secondary sources include statistics, company publications, competitive analysis, and professional articles.  Primary market research methods involve conducting interviews with current customers, potential customers, or market experts. Commercial due diligence is performed when considering the acquisition of a company, prior to making an investment in a company, or when entering a partnership. 
Our attorneys in Germany can perform commercial due diligence as part of our legal services. 

Company due diligence for shelf companies

Our law firm in Germany also offers services in company due diligence for shelf companies. Since shelf companies have not conducted business, the focus of due diligence is assessing the company's legal and financial standing, as well as its suitability for the intended purposes of the buyer. Some of the steps involved in due diligence for shelf companies include:
  • Review the legal status of the shelf company;
  • Conducting a financial analysis of the company;
  • Verify that the shelf company is compliant with all applicable regulations, etc.
Opening a company and making investments in Germany is an excellent idea, especially considering these facts and statistics:
  • Germany’s GDP was estimated at 4.07 trillion dollars in 2022;
  • Services make up the largest portion of the country's GDP, approximately 69%;
  • In 2021, German car manufacturing was the first in Europe, with over 3.1 million passenger cars and 351,000 commercial vehicles produced in German factories;
  • The Mechanical and Electrical industry in Germany generates a turnover or revenue of more than 1 trillion euros annually.
For complete information about all the types of company due diligence procedures available in Germany, you can contact our lawyers.