Mergers and acquisitions in the Netherlands: how a deal works

In a merger two companies combine into one legal entity; in an acquisition one party buys the shares or the assets of another company, which usually continues to exist. The most important choice is between a share deal and an asset deal, because it decides what the buyer takes on, including the employees: in an asset deal staff transfer automatically if an undertaking is transferred, while in a share deal their employer simply stays the same.

Dutch law adds a few fixed points to any sizeable transaction. Shares in a Dutch BV or NV are transferred by notarial deed. A works council must be asked for advice before the decision is taken, and the SER Merger Code may require the trade unions to be informed. Above certain turnover thresholds, the deal must be notified to the Netherlands Authority for Consumers and Markets (ACM) before completion.

What is the difference between a merger and an acquisition?

In a legal merger one company absorbs another, or both merge into a new company, and the disappearing company ceases to exist. In an acquisition the buyer takes over shares or assets, and the target usually continues as a subsidiary or as a business within the buyer’s group.

The term “merger” is used loosely in business. In Dutch law, a legal merger (juridische fusie) has a specific meaning. Under Article 2:309 of the Dutch Civil Code (BW), the acquiring company takes over the entire assets and liabilities of the disappearing company by universal title. The disappearing company ceases to exist, and its shareholders become shareholders in the acquiring company. The procedure involves a merger proposal, filing with the trade register, a creditor objection period and a notarial deed.

In practice, most transactions are acquisitions. The buyer purchases the shares in the target (a share deal) or specific assets and liabilities of its business (an asset deal). A “merger of equals” is rare; most deals have a clear buyer and seller, even when they are presented publicly as a merger. The table below sets out the main differences.

What are the benefits and risks?

A well-executed deal can be a shortcut to growth that is hard to achieve on your own. The risks lie mainly in overpaying, hidden liabilities and a failed integration.

Benefits usually fall into a few areas: economies of scale, faster access to new markets, customers and staff, and acquiring technology or intellectual property that would take years to develop yourself. Buying the company that owns a patent or software is often the quickest route to it.

The risks are just as real. A clash of corporate cultures can drive away key staff, a buyer in a competitive bidding process may overpay, and expected savings may never materialise if IT, supply chains and teams are not integrated. Legally, the main defence lies in careful due diligence and well-drafted warranties and indemnities in the purchase agreement.

Which Dutch rules apply to a transaction?

Company law determines how shares or assets transfer. Employee participation rules, competition law and, for some sectors, investment screening determine what must happen before completion.

Transferring shares

Shares in a Dutch BV are transferred by a notarial deed executed before a civil-law notary in the Netherlands (Article 2:196 BW); for an NV the same applies to registered shares (Article 2:86 BW). The articles of association of a BV may contain transfer restrictions (Article 2:195 BW), such as a requirement to offer the shares to the other shareholders first or to obtain approval from a corporate body. Check these rules at an early stage, because they can affect the timetable. Dutch corporate law also governs the approvals needed within the buyer and the seller.

Works council and trade unions

If the target or the buyer has a works council (ondernemingsraad), it must be asked for advice on a proposed transfer of control of the enterprise under Article 25 of the Works Councils Act (Wet op de ondernemingsraden, WOR). The request must come at a time when the advice can still have a real influence on the decision. In practice, the purchase agreement is often signed only after the works council has advised, or the signing is made subject to that advice.

The SER Merger Code (SER-Fusiegedragsregels 2015) applies to acquisitions of control of an enterprise that normally employs 50 or more people in the Netherlands. The parties must then inform the trade unions involved and the Social and Economic Council (SER) before reaching agreement, and consult the unions.

Merger control by the ACM

A concentration must be notified to the ACM if the parties’ combined worldwide turnover exceeds EUR 150 million and at least two of them each achieve at least EUR 30 million in the Netherlands (Article 29 of the Dutch Competition Act (Mededingingswet)). The deal may not be completed before the ACM has cleared it. If the ACM has serious concerns, it can open a second, longer investigation phase, which affects the timetable. Larger deals may fall under the EU Merger Regulation instead, with notification to the European Commission.

Investment screening and sector rules

Acquisitions of certain vital providers, operators of business campuses or companies active in sensitive technology may require prior notification under the Security Screening of Investments, Mergers and Acquisitions Act (Wet Vifo), which applies since 1 June 2023. Some sectors, such as financial services, energy and telecommunications, have their own approval requirements. Include such approvals as conditions in the purchase agreement.

Employees

In a share deal the employer does not change: the target remains the employer, and employment contracts continue unchanged. In an asset deal in which an economic entity retaining its identity is transferred, employees transfer to the buyer by operation of law with their existing terms (Article 7:662 and following BW). The buyer cannot pick and choose staff in that situation. Our article on transfer of undertaking explains the rules.

What should businesses and individuals consider before a transaction?

Before a transaction, assess whether it makes financial and strategic sense, which approvals are needed and how the businesses will be integrated. Those three questions determine the structure, the timetable and the contract.

How do you assess the financial and strategic case?

Start with the business case: what does the transaction add, what are the realistic synergies and what are the risks? A financial due diligence, together with valuation and financial modelling, gives insight into the value of the target and the assumptions behind the price.

Look beyond the purchase price. Transaction costs, financing costs, tax consequences and the costs of integration all affect the return. Tax consequences can be decisive for the choice between a share deal and an asset deal, and should be assessed by a tax adviser at an early stage.

Which regulatory questions should you check early?

Check early whether the transaction must be notified to the ACM or the BTI, whether sector-specific permits are affected and whether the works council must be consulted. These steps determine the timetable between signing and completion.

Sector-specific rules may apply as well. Acquisitions of financial institutions require a declaration of no objection from the Dutch central bank (De Nederlandsche Bank, DNB), and in the healthcare sector a concentration test by the Dutch Healthcare Authority (Nederlandse Zorgautoriteit, NZa) may be required.

How do you prepare for integration?

Plan the integration before completion. Technical compatibility, the transfer of data and systems, the retention of key employees and differences in culture determine whether the expected value is actually achieved.

In many transactions, technology is the reason for the deal: the buyer wants to acquire software, data, knowledge or digital infrastructure. Due diligence should then focus on who owns the intellectual property, whether the software uses open-source components under restrictive licences, and whether personal data may be transferred and used by the buyer under the General Data Protection Regulation (GDPR).

The energy transition and sustainability also influence many transactions. Buyers look for businesses with sustainable technologies, but also examine the environmental risks and permits of the target. In energy-related transactions, specific permits, grid connections and subsidies often need to be transferred or amended.

A clear integration plan, agreements on transitional services from the seller, and retention arrangements for key staff reduce the risks.

What are the stages of a transaction?

A typical transaction moves from a letter of intent through due diligence, negotiation and structuring to signing and completion, followed by integration. Each stage builds on the previous one.

Letter of intent

Once the first talks have gone well, the parties usually sign a letter of intent. It records the main terms, such as the indicative price and the structure, and contains binding clauses on confidentiality and exclusivity. Under Dutch law, breaking off negotiations at an advanced stage can lead to liability. Our article on the letter of intent explains when such a document binds you.

Due diligence

The buyer investigates the target’s financial, legal, tax, operational and commercial position. The purpose is to verify the seller’s information and to uncover risks before the price and the warranties are fixed.

A common legal red flag is dependence on a few customers without long-term contracts, or contracts that the other party may terminate on a change of control. Employment matters also deserve attention: the terms of key staff, collective labour agreements, pension arrangements and any pending dismissal cases. Increasingly, buyers also examine environmental, social and governance (ESG) risks, such as permits, emissions and supply-chain compliance, because these can affect both value and liability.

Valuation and negotiation

With the due diligence findings on the table, the parties negotiate the price and the terms. Valuation involves more than last year’s profit: forecasts of future cash flows, the value of the assets and comparisons with similar companies all play a role.

The findings often lead to a price adjustment or to specific protection in the purchase agreement. Besides the price, the parties negotiate the payment structure, the position of the management and any obligations of the seller after completion, such as a non-compete clause. A price mechanism is also agreed: a locked box, in which the price is fixed on the basis of an earlier balance sheet, or completion accounts, in which the price is adjusted after completion.

Share deal or asset deal?

In a share deal the buyer acquires the entire company, with all its assets and liabilities, including those that are not yet known. In an asset deal the buyer selects the assets and liabilities it takes over, but each asset must be transferred in the way the law prescribes.

A share deal is usually simpler to execute: one notarial deed transfers the shares, and contracts, permits and staff remain with the company. The buyer needs strong warranties and indemnities to cover risks from the past. An asset deal gives more control over what is taken on, but requires separate transfers: a notarial deed for real estate, assignment of receivables, consent from counterparties for the transfer of contracts and, where needed, new permits. Employees can transfer by operation of law, as explained above.

The choice is also influenced by tax consequences for buyer and seller. Law & More does not advise on tax structuring; we work alongside your tax adviser on that aspect.

The purchase agreement

The share or asset purchase agreement contains the definitive terms. The key provisions are the price and payment, conditions for completion, warranties, indemnities and limitations of liability.

Warranties are statements by the seller about the condition of the company, for example that the accounts are correct and that there are no pending disputes. If a warranty turns out to be incorrect, the buyer can claim compensation within the limits agreed. Indemnities cover specific risks identified in due diligence, euro for euro. The agreement usually limits the seller’s liability in amount and in time, and requires the buyer to notify a claim within a set period. Such contractual arrangements usually replace the general Dutch rules on non-conformity. Some buyers take out warranty and indemnity insurance.

Signing and completion

Signing and completion often take place at different moments. Between them, the conditions must be fulfilled, such as ACM clearance, financing or the works council’s advice.

At completion, the notary executes the deed of transfer of the shares, the price is paid and the buyer takes control. The seller usually delivers resignation letters from directors, updated registers and other documents agreed in the purchase agreement. The new shareholder is then entered in the shareholders’ register and the change of directors is registered with the Chamber of Commerce.

Integration after completion

Post-merger integration is the process of combining the two organisations: harmonising IT systems, aligning processes and bringing teams together. Legally, this phase often involves adjusting employment terms, restructuring group entities and renegotiating contracts.

Integration should be planned alongside the deal, not after it. Changes to employment terms require the consent of employees or a valid unilateral amendment clause, and restructuring may again require the works council’s advice. Communication with staff and customers from day one reduces the risk that key people or clients leave.

How do you protect yourself as a seller?

By disclosing known issues, limiting warranties and liability, and agreeing clear rules on payment. A seller who discloses openly reduces the risk of claims after completion.

The disclosure letter is the seller’s main tool. Matters that are fairly disclosed in it, or in the data room, can usually not be the basis of a warranty claim later. Agree in the purchase agreement what counts as fair disclosure and whether the whole data room is deemed disclosed.

Negotiate the limitations: a maximum amount for warranty claims, often expressed as a percentage of the price, a minimum threshold below which claims are not admissible, and a period within which claims must be notified. Longer periods are usually agreed for tax and title to the shares. If part of the price is deferred or held in escrow, agree when it is released and on what conditions.

A non-compete clause for the seller is common, but it must be reasonable in scope, duration and territory. Competition law limits how far such a clause may go, and an overly broad clause may not be enforceable in full.

What happens to the directors and management?

The buyer usually wants to appoint its own directors at completion, and the seller wants to be released from liability for the period before. Both points are arranged in the purchase agreement.

A statutory director of a BV is appointed and dismissed by the general meeting (Articles 2:242 and 2:244 BW), unless the articles of association provide otherwise. At completion, the new shareholder adopts resolutions to accept the resignation of the outgoing directors and to appoint new ones. Outgoing directors often ask for discharge (décharge) for their management; whether a buyer grants that, and to what extent, is a matter for negotiation.

If a director is also an employee, the employment contract needs separate attention. Under settled Supreme Court case law, the dismissal of a statutory director of a BV in principle also ends the employment contract, but the rules on notice and the transition payment (transitievergoeding) may apply. Arrange the position of management that stays on in new agreements, sometimes combined with an earn-out or a management participation.

Which contracts need attention?

Contracts with change-of-control clauses, contracts that cannot be transferred without consent and financing agreements need attention. They can give a counterparty a right to terminate or to renegotiate.

In a share deal the contracts remain with the target company, but many commercial agreements, leases and licences contain a clause allowing the other party to terminate if control of the company changes. Identify these in due diligence and decide whether consent must be obtained before completion. Financing agreements often provide that the loan becomes due on a change of control; the buyer then has to arrange refinancing.

In an asset deal each contract must be transferred with the cooperation of the other party (Article 6:159 BW). Without that consent, the contract stays with the seller. The parties then agree how the benefits and obligations are passed on in the meantime. Permits are often tied to a specific holder and may need to be applied for again.

How does it work in practice?

Most acquisitions of Dutch small and medium-sized companies are share deals, with a letter of intent, a due diligence investigation and a purchase agreement with warranties. The legal work is concentrated in the due diligence and in the negotiation of the purchase agreement.

An example to illustrate: a foreign technology company wants to buy a Dutch software business with a works council. During due diligence it discovers that freelancers wrote part of the source code without a written transfer of intellectual property, which Dutch copyright law requires (Article 2 Auteurswet). The parties agree that the seller arranges the transfer before completion, backed by an indemnity. The works council advises on the draft agreement, and the shares are transferred at the notary after that advice.

What should you check as a buyer?

As a buyer, you take on the company’s history in a share deal. Check these points before signing:

• Do the articles of association contain transfer restrictions under Article 2:195 BW, such as an offer obligation?
• Which key contracts, leases and loans contain change-of-control clauses?
• Does the target own its intellectual property, including software written by freelancers?
• Do the deal thresholds require ACM notification or a Vifo notification before completion?
• Has the works council been asked for advice under Article 25 WOR at a time when it can still influence the decision?
• Do the warranties and indemnities cover the risks found in due diligence?

What should you check as a seller?

As a seller, your liability after completion depends on what you disclose and what you agree. Check these points:

• Is every known issue fairly disclosed in the disclosure letter or the data room?
• Is there a cap, a threshold and a notification period for warranty claims?
• When and on what conditions is any deferred price, escrow or earn-out paid?
• Is the non-compete clause reasonable in scope, duration and territory?
• Will the outgoing directors receive discharge and a release from personal guarantees?

What can we do for you with a merger or acquisition?

Our corporate lawyers advise buyers, sellers and investors from the letter of intent to completion:

• We draft or review the letter of intent, including exclusivity and confidentiality.
• We carry out the legal due diligence and report the red flags in plain language.
• We draft and negotiate the share or asset purchase agreement, including warranties, indemnities and limitations.
• We prepare the works council advice request and the SER Merger Code notification.
• We coordinate the ACM notification and the notarial transfer of the shares.

Summary

• A legal merger combines two companies into one; in an acquisition the buyer takes over shares or assets and the target usually continues to exist.
• In a share deal the buyer takes on the whole company, including its history; in an asset deal it selects what it takes, but employees can transfer by law.
• Shares in a BV or NV transfer by notarial deed; check transfer restrictions in the articles of association.
• Ask the works council for advice in time, observe the SER Merger Code and notify the ACM when the turnover thresholds are met.
• Protect yourself through due diligence and clear warranties, indemnities and limitations in the purchase agreement.

Frequently asked questions