Mergers and acquisitions in the Netherlands: how a deal works

A Dutch acquisition usually takes one of two forms, a share deal or an asset deal, and that choice determines almost everything that follows. A legal merger, in which one company is absorbed by another by operation of law, is a third option, but in practice it is used mainly within groups.

In a share deal the buyer acquires the shares and therefore the company as it stands, including every liability it carries, known or not. In an asset deal the buyer acquires selected assets and liabilities. That is cleaner, but each contract must be transferred with the cooperation of the counterparty, and employees transfer automatically to the buyer if the transaction amounts to a transfer of an undertaking.

The legal framework has several fixed points. A transfer of shares in a Dutch private limited company (besloten vennootschap, BV) must be effected by a notarial deed executed by a Dutch civil-law notary. Where the transaction affects the business, the works council (ondernemingsraad) has a right to give advice before the decision is taken, and that right has teeth: a decision taken in disregard of it can be challenged before the Enterprise Chamber (Ondernemingskamer). The Merger Code of the Social and Economic Council (SER) requires trade unions to be informed in certain cases. Clearance from the Authority for Consumers and Markets (ACM) is required where the parties’ turnover exceeds the statutory thresholds, and separate screening applies to investments in vital providers and sensitive technology under the investment screening legislation in force since 2023.

Between signing and completion, and after completion, risks are allocated mainly by the contract, through warranties and indemnities. The statutory protection for a buyer of shares is limited and a buyer is expected to investigate, so what is not warranted is often hard to recover.

What are mergers and acquisitions?

In an acquisition, one party buys another company, through its shares or its assets. In a merger, two businesses combine; under Dutch law a legal merger (juridische fusie) means that one company ceases to exist and its assets and liabilities pass to the other by operation of law.

How do the different transaction structures work?

The term “merger” is used loosely in practice. The main structures under Dutch law are:

• Share deal (aandelentransactie): the buyer acquires the shares in the target company. The company itself remains the same legal entity, with all its contracts, permits, employees and liabilities.
• Asset deal (activa-passivatransactie): the buyer acquires specific assets, such as inventory, intellectual property and customer contracts, and assumes specific liabilities. Each asset must be transferred in the manner the law requires for that type of asset, and contracts can only be transferred with the counterparty’s consent (Article 6:159 of the Dutch Civil Code, BW).
• Legal merger (Article 2:309 BW): one company is absorbed into another. The companies draw up a merger proposal, which is filed with the trade register and announced publicly. Creditors can oppose the merger within one month of that announcement (Article 2:316 BW). Cross-border mergers within the EU are also possible under specific rules.
• Legal demerger (juridische splitsing, Article 2:334a BW): the reverse of a merger, often used to separate a business before a sale.

The legal structure must match the motive for the deal. A buyer who wants a clean start will usually prefer an asset deal; a buyer who needs the target’s permits and contracts will usually prefer a share deal.

How does a typical acquisition process run?

A typical process runs from a letter of intent, through due diligence and negotiation of the purchase agreement, to signing and completion. The steps between signing and completion depend on the approvals that are needed.

The process usually starts with a non-disclosure agreement and a letter of intent (LOI) setting out the price, the structure and the main conditions. An LOI is often expressed to be non-binding, but some provisions, such as exclusivity and confidentiality, are usually binding. Under Dutch law, negotiations may not be broken off at will in every stage: in an advanced stage, breaking off can lead to liability for costs incurred or, exceptionally, for lost profit.

Next, the buyer carries out due diligence: an investigation of the target’s legal, financial, tax and commercial position. The findings feed into the price, the warranties and any specific indemnities in the share purchase agreement (SPA) or asset purchase agreement (APA).

At signing, the parties are bound by the agreement. Completion follows when the conditions precedent are met, for example ACM clearance, investment screening clearance or the works council’s advice. In a share deal, the shares are transferred at completion by notarial deed, and the buyer pays the purchase price.

Which areas of law play a role?

An acquisition touches on corporate law, contract law, employment law, competition law and tax law, and often also on real estate, intellectual property and data protection. Each area brings its own requirements and risks.

For this reason, M&A transactions are usually team work: lawyers, a civil-law notary, tax advisers and financial advisers each cover part of the transaction. Tax structuring, and in particular international tax structuring, is a specialist field; we work with tax advisers for that part. Foreign buyers in particular should be aware of the specific Dutch requirements, such as the notarial deed and the role of the works council. You can read more about business transactions in the Netherlands and the legal pitfalls foreign companies should avoid.

What is the legal framework for M&A in the Netherlands?

The main rules are in Book 2 (legal entities) and Book 7 (specific contracts, including employment) of the Dutch Civil Code, the Works Councils Act (Wet op de ondernemingsraden, WOR), the Competition Act (Mededingingswet) and the investment screening legislation. For listed companies, the Financial Supervision Act (Wet op het financieel toezicht, Wft) adds rules on public offers.

When must you notify the ACM?

A concentration must be notified to the ACM if the parties together had a worldwide turnover of more than €150 million in the previous calendar year, and at least two of them each had a turnover of at least €30 million in the Netherlands (Article 29 of the Competition Act). Lower thresholds apply in the healthcare sector.

After notification, a waiting period of four weeks applies, during which the transaction may not be completed. If the ACM considers that the concentration may significantly impede competition, it can require a licence; the ACM then has thirteen weeks to decide on the licence application. Completing a notifiable transaction without clearance can lead to a substantial fine. If the turnover thresholds of the EU Merger Regulation are met, the European Commission is competent instead of the ACM.

The table below summarises the main regulators and approval requirements in Dutch M&A.

When does investment screening apply?

Since 1 June 2023, the Investment Screening Act (Wet veiligheidstoets investeringen, fusies en overnames, Wet Vifo) requires notification of certain acquisitions to the Investment Screening Bureau (Bureau Toetsing Investeringen, BTI). This applies to investments in vital providers, managers of high-tech business campuses and companies active in sensitive technology, such as military and dual-use goods.

Both the investor and the target must notify the acquisition. The BTI assesses whether the investment poses a risk to national security. If it does, conditions can be imposed and, as a last resort, the investment can be prohibited. The transaction may not be completed until the assessment has been completed. The Act applies regardless of the nationality of the investor, so Dutch and EU buyers must also check whether it applies.

What should due diligence cover?

Dutch law does not oblige a buyer to carry out due diligence, but a buyer who does not investigate runs a real risk. A buyer is expected to investigate the target, while the seller has a duty to disclose information that it knows is important to the buyer.

How those duties relate to each other depends on the circumstances. As a rule, a seller cannot rely on the buyer’s failure to investigate if the seller withheld information it was obliged to share. Even so, a buyer who relies only on the general law will often find it difficult to recover losses after completion. That is why due diligence and contractual warranties are standard in Dutch transactions.

A legal due diligence typically covers:

• corporate matters: the shareholder register, articles of association, previous share transfers and any pledges;
• material contracts, in particular change-of-control clauses that allow a counterparty to terminate when the target is sold;
• employment: employment contracts, collective labour agreements, pension arrangements and pending disputes;
• intellectual property, IT and data protection;
• real estate, permits and environmental matters;
• litigation, claims and regulatory investigations.

The outcome of the due diligence determines the next steps. Known risks are usually covered by a specific indemnity or a reduction of the price, while unknown risks are covered by warranties. Warranties are statements by the seller about the state of the company; if a warranty turns out to be incorrect, the buyer can claim compensation within the limits agreed in the contract, such as a maximum amount, a minimum threshold and a time limit for claims. Buyers and sellers increasingly use warranty and indemnity insurance to cover these risks.

How is the purchase price determined?

The two common price mechanisms are completion accounts and the locked box. With completion accounts, the price is adjusted after completion based on the balance sheet at the completion date. With a locked box, the price is fixed on the basis of an earlier balance sheet, and the seller undertakes that no value will leak from the company between that date and completion.

Earn-out arrangements, where part of the price depends on future results, are also common, especially when the seller remains involved in the business. They require precise definitions and agreements on how the business will be run during the earn-out period, because unclear earn-out provisions easily lead to disputes.

What are the rules on employees, the works council and trade unions?

If the target has a works council, it must be asked for advice on a proposed transfer of control, at a time when the advice can still influence the decision (Article 25 WOR). If the company then takes a decision that departs from the advice, it must wait one month before implementing it, and the works council can appeal to the Enterprise Chamber within that period (Article 26 WOR).

The advice right usually lies with the works council of the company that takes the decision, which may be the seller, the buyer or both. In practice, the SPA is often signed subject to the works council’s advice, or the parties first sign a binding offer and only sign the SPA after the advice has been obtained. In addition, the SER Merger Code requires the parties to inform the trade unions involved in the company in time about a proposed merger or acquisition, if the company has fifty or more employees.

In an asset deal that qualifies as a transfer of an undertaking (Article 7:662 BW and following), the employees transfer to the buyer by operation of law, with the same terms and conditions. The seller remains jointly liable for obligations arising before the transfer for one year. The buyer cannot choose which employees to take over, and dismissal because of the transfer is not allowed. These rules often weigh heavily in the choice between an asset deal and a share deal.

What additional rules apply to listed companies?

The acquisition of a listed company usually takes place through a public offer, which is regulated by the Financial Supervision Act and supervised by the Dutch Authority for the Financial Markets (AFM). A party that acquires 30 percent or more of the voting rights in a listed company must in principle make a mandatory offer for all shares (Article 5:70 Wft).

After a successful offer, a shareholder holding at least 95 percent of the capital can start squeeze-out proceedings before the Enterprise Chamber to acquire the remaining shares (Articles 2:92a and 2:201a BW). Public offers involve strict timetables and disclosure obligations, and need to be prepared with specialist advice.

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 should you check as a buyer?

As a buyer, you carry the risk of everything you did not investigate or have warranted. Check these points before you sign the SPA.

• Does the due diligence cover change-of-control clauses, pending claims and the shareholder register?
• Are known risks covered by a specific indemnity or a price reduction, and unknown risks by warranties with a workable cap and claim period?
• Is the transaction notifiable to the ACM or the BTI, and is completion conditional on clearance?
• In an asset deal: does it qualify as a transfer of an undertaking under Article 7:662 BW, so that the employees transfer with it?
• With a locked box: does the SPA define leakage precisely and give you a claim for it?

What should you check as a seller?

As a seller, your exposure after completion lies mainly in the warranties and your duty to disclose. Check these points before you sign.

• Have you disclosed everything you know to be important to the buyer, preferably in a disclosure letter?
• Are your warranty liabilities limited by a maximum amount, a de minimis threshold and a time limit for claims?
• Has the works council been asked for advice in time under Article 25 WOR, and have the trade unions been informed under the SER Merger Code?
• Are earn-out conditions defined precisely, including how the business will be run during the earn-out period?
• Is the notary ready to execute the deed of transfer of the shares at completion?

What can we do for you with mergers and acquisitions?

We assist buyers and sellers, including international companies, from the letter of intent to completion, alongside your notary and tax adviser; our mergers and acquisitions and corporate lawyer pages describe this work.

• We draft and negotiate the letter of intent, the non-disclosure agreement and the SPA or APA.
• We carry out the legal due diligence and report the risks that affect price and warranties.
• We check whether ACM notification or Wet Vifo screening is required and prepare the filing.
• We prepare the request for advice to the works council and the notification to the trade unions.
• We handle warranty and indemnity claims after completion.

Summary

• Most Dutch acquisitions are share deals or asset deals; a legal merger is used mainly within groups. The choice determines which liabilities, contracts and employees come along.
• Shares in a BV are transferred by notarial deed; in an asset deal that is a transfer of an undertaking, employees transfer automatically.
• Ask the works council for advice in time (Article 25 WOR) and inform the trade unions under the SER Merger Code.
• Check early whether ACM clearance (above €150 million combined and €30 million each for two parties in the Netherlands) or Wet Vifo screening is needed.
• Due diligence, warranties and indemnities do most of the work in allocating risk between buyer and seller.

Frequently asked questions