BaFin Acquisition Approval

Purchase of a Bank or Financial Institution Requires BaFin Approval

When implementing business models related to financial instruments, crypto assets or money in the broadest sense, the question regularly arises as to whether it is necessary to obtain a dedicated BaFin license. If a BaFin license is required for the planned business activity, a decision must be made as to whether applying for an own BaFin license makes sense in light of the associated duration of the BaFin procedure. An alternative to applying for an own BaFin license can be the acquisition of an already licensed and supervised bank or financial institution. However, even in the case of the acquisition of a bank, financial services provider or securities institution, the interested acquirer must successfully complete an ownership control procedure with BaFin and obtain the approval of the supervisory authority for the acquisition prior to the purchase. For obtaining the BaFin Acquisition Approval, extensive information on the proposed acquirer and the involved owners of significant holdings must be disclosed to BaFin. A significant holder is a person or entity holding at least 10% or more of the capital or voting rights in a company. In the case of more complex ownership structures, the percentage of ownership held by individuals is also derived indirectly. For example, if a person has a 50% shareholding in a limited liability company that wishes to purchase and fully acquire a financial institution, the shareholding of this person is 50%. He or she is then considered to be a significant holder.

BaFin Requires Detailed Information on the Interested Acquirer

The acquirer interested in acquiring a bank or financial institution must submit a formal notification of its intention to acquire the target company to BaFin in due time prior to the planned acquisition. The notification must contain comprehensive information. In this respect, BaFin requires detailed information on the planned acquisition and the objectives pursued by the interested acquirer. In addition, it must be disclosed what business activities the interested acquirer pursues prior to the acquisition and what his financial situation is. Disclosure of the significant owners behind the proposed acquirer is also required. They must also disclose their financial situation and submit their CVs and proof of their reliability to BaFin. Furthermore, it is required that the interested acquirer declares within the scope of the ownership control procedure how the proper business organization of the target company will be following an acquisition and how it is to be ensured that all regulatory requirements can always be met after the acquisition. Depending on the scope of the planned acquisition, a BaFin approval also requires the submission of a detailed strategy document or a business plan explaining the strategic planning of the target company’s business activities after the planned acquisition.

BaFin Approval also Required for the Acquisition of a Percentage of Shares of a Bank or Financial Services Provider

The BaFin approval for an acquisition must be carried out both in the case of a planned complete acquisition of a bank or a financial institution and in the case of a planned acquisition of a qualified participation, i.e. in the amount of 10% or more. The content requirements for the BaFin notification are similar in all cases. The only significant difference is that a simple strategy document must be submitted to BaFin for the acquisition of a qualified participation of up to 20% of the capital or voting rights, and a more comprehensive strategy document must be submitted for the acquisition of shares of between 20% and 50%. In contrast, in the case of a planned acquisition of a qualified participation of more than 50%, a comprehensive business plan must be submitted, which includes a strategic development plan, budgeted balance sheets and budgeted profit and loss accounts for the target company for the first years after the acquisition, as well as a presentation of the effects of the acquisition on the management and general organizational structure of the target company. If, for example, the interested acquirer plansto exchange managers in the target company after the acquisition, this must be disclosed with evidence of the professional suitability and reliability as well as the time availability of the new candidate.

The competent lawyer for questions concerning the acquisition of a bank or other financial institution in our law firm is Attorney Lutz Auffenberg, LL.M. (London).