Selling to a U.S. Buyer: What Works Differently in the Purchase Agreement
Sale of a company to a U.S. investor – choice of law, warranties, sandbagging and investment screening
According to media reports, a listed German traditional company is itself driving forward its sale to a U.S. group. In the German Mittelstand, too, U.S. strategic buyers and U.S. financial investors are among the frequent acquirers. They bring their own contractual habits. Sellers who know the differences negotiate more effectively.
Choice of law and form
U.S. buyers often propose the law of Delaware or New York. For the purchase agreement this is in principle permissible: “A contract shall be governed by the law chosen by the parties” (Art. 3 para. 1 sentence 1 Rome I Regulation). The assignment of shares in a German limited liability company (GmbH), however, is always governed by German law and must be notarised (§ 15 para. 3 GmbHG). For the obligation to assign, § 15 para. 4 GmbHG likewise requires notarial form; whether this also applies to a purchase agreement governed by foreign law is disputed. In practice, the agreement is therefore as a rule notarised before a German notary.
Warranties and indemnities
U.S. contracts contain extensive representations and warranties and indemnification provisions, limited by thresholds (“basket”) and maximum amounts (“cap”). German contracts, too, work with independent guarantees and largely exclude statutory warranty rights. The seller cannot, however, rely on such an exclusion to the extent that he has fraudulently concealed a defect or has given a guarantee of quality (§ 444 BGB). Warranty insurance (“W&I insurance”) is frequently taken out. It regularly does not cover known circumstances.
What the buyer already knew (“sandbagging”)
“Sandbagging” means that the buyer asserts claims for a breach of warranty although it knew before signing that the warranty was untrue. The Delaware Court of Chancery has confirmed that this is in principle permissible under Delaware law, unless the contract provides otherwise (In re Dura Medic Holdings, Inc. Consolidated Litigation, decision of 20.02.2025, C.A. No. 2019-0474-JTL). According to that decision, information from due diligence limits the warranties only if it is set out in the contract itself, for example in disclosure schedules. A final decision by the Delaware Supreme Court is still outstanding.
Under German law, the statutory rights in respect of defects are excluded where the buyer has knowledge of the defect, and in principle also where the buyer is unaware of it due to gross negligence (§ 442 para. 1 BGB). Whether this also applies to independent guarantees has not been conclusively clarified. Sellers should therefore regulate the buyer's knowledge expressly.
Investment screening
Where an investor from outside the EU (a “non-Union investor”) acquires a German company or a stake in it, the Federal Ministry for Economic Affairs may examine whether public order or security is likely to be impaired (§ 55 para. 1 AWV). The review threshold is in principle 25 per cent of the voting rights, and in security-relevant sectors 10 or 20 per cent (§ 56 para. 1 AWV). There, the conclusion of the contract must be notified (§ 55a para. 4 AWV). Until clearance, the purchase agreement is provisionally ineffective (“schwebend unwirksam”) (§ 15 para. 3 AWG), and closing is prohibited (§ 15 para. 4 AWG). A new Investment Screening Act exists so far only as a ministerial draft (Referentenentwurf); until further notice, the AWG and AWV apply.
Checklist for sellers
Determine choice of law, dispute resolution and form early
Negotiate the warranty catalogue, thresholds, cap and limitation period
Regulate the buyer's knowledge expressly
Include disclosures in full in the contract schedules
Clarify investment screening before signing and agree clearance as a closing condition
Conclusion
A sale to a U.S. buyer is very manageable if the contract mechanics are deliberately negotiated from the outset. Please contact us if you have any questions.
As of: 03.11.2026
NIETZER Rechtsanwälte · Attorneys at Law (USA) · Heilbronn · www.unternehmensrecht.com
This article is for general information purposes only and does not replace legal advice in an individual case.
