The Transaction Value Threshold in German Merger Control

Why Germany has a transaction value threshold

The transaction value threshold in German merger control captures acquisitions of companies that generate little turnover but are valuable because of their innovation, data, users or technology. Classic turnover thresholds miss many such deals: a start-up with a promising product, a fast-growing platform that monetises later or a biotech company before market approval may have almost no revenue in Germany, even though the buyer pays a high price precisely because of its competitive potential. To close this gap, the legislature added a size-of-transaction test to the German Competition Act (GWB) in 2017, now found in § 35(1a) GWB.

Austria introduced a comparable test at the same time, and the Federal Cartel Office (Bundeskartellamt) and the Austrian competition authority published joint guidance on both provisions. For buyers, especially in technology, life sciences and digital markets, this means that a German filing can be required for a deal where the target has no or only modest German turnover. Missing a filing has serious consequences, because a notifiable deal may not be closed before clearance.

The conditions of the transaction value threshold

The test applies only if all of its conditions are met cumulatively. It supplements the ordinary turnover thresholds of § 35(1) GWB and becomes relevant precisely where the second domestic turnover threshold of EUR 17.5 million is not met. In the last business year before the concentration, the following must be satisfied:

In practice, the first three conditions are usually easy to check: the buyer group typically meets the worldwide and first domestic thresholds on its own, and the target’s German turnover is low. The real questions concern the value of the consideration and, above all, whether the target is significantly active in Germany. Both require a careful analysis that should begin early in the deal timetable, because the parties must also be able to explain their answers in a notification.

Calculating the value of the consideration

Under § 38(4a) GWB, the consideration comprises all assets and other monetary benefits that the seller receives from the buyer in connection with the concentration (the purchase price), plus the value of any liabilities assumed by the buyer. The concept is deliberately broad. It covers cash and shares used as consideration, and it is not limited to the amount stated as the purchase price in the main agreement. Benefits agreed in side agreements, if they are connected with the acquisition, also count.

Earn-outs, options and incentive payments

Variable components raise the most frequent questions.

Earn-outs and other contingent payments generally have to be included at a realistic value, and payments to the seller under ancillary agreements, such as licence, non-compete or service agreements, may form part of the consideration if they are economically part of the deal. Where the buyer already holds a stake and acquires control in steps, the consideration for the relevant step has to be assessed. The joint guidance of the German and Austrian authorities discusses these issues in detail, including the valuation date and the treatment of employee incentive arrangements, but parties should bear in mind that the Federal Cartel Office has said the guidance will be updated following recent case law.

Assumed liabilities

The inclusion of assumed liabilities means that a buyer cannot avoid § 35(1a) GWB by agreeing a low equity price and taking over substantial financial debt. Conversely, the threshold of EUR 400 million is high enough that most small venture deals fall below it. The consideration must be documented in the filing, because § 39(3) GWB requires the notifying parties to state the value of the consideration and the basis for its calculation.

Significant domestic activity and the Meta/Kustomer decision

The most difficult condition is that the target must be active in Germany to a significant extent. In its 2022 guidance, the Federal Cartel Office explained that marginal activity is not sufficient and that it would assume no significant domestic activity if the target generated German turnover below EUR 17.5 million and that turnover adequately reflected its market position and competitive potential. Indicators of activity in Germany include users, downloads, research and development sites and other forms of market presence, depending on the industry.

In its decision of 17 June 2025 – KVR 77/22 (Meta/Kustomer), the Federal Court of Justice (Bundesgerichtshof) addressed the condition for the first time. According to the court’s official summary, the Federal Cartel Office may determine by order that the parties must notify a concentration. Whether a target is active in Germany depends on its current competitive activities and whether they have a domestic link capable of creating competitive risks for German markets. Order data processing that gives access to data of end customers in Germany can qualify. The effect on markets must have a minimum intensity, but the court held that the requirements for a notification obligation should not be set high.

The Federal Cartel Office has since added a note to its guidance stating that the 2022 guidance no longer reflects the current legal situation, that it now bases its practice on the principles of the Meta/Kustomer decision, and that the guidance will be updated. In practice, the decision lowers the bar: parties can no longer rely on modest German turnover alone, and access to data of German users, customers or end customers deserves particular attention..

Procedure, suspension and consequences of not filing

A concentration caught by § 35(1a) GWB is subject to the same procedure as any other German merger filing. The notification must contain the information required by § 39(3) GWB, including, for these cases, the type and scope of the target’s activities in Germany. The Federal Cartel Office has one month from receipt of the complete notification to open an in-depth investigation, and, if it does, it must decide within five months of receipt, subject to extensions (§ 40(1) and (2) GWB). Most cases are cleared in phase one. For a detailed explanation of the filing process, see our article on merger control filings with the Federal Cartel Office.

Until clearance or expiry of the review periods, the parties may not implement the concentration or participate in its implementation (§ 41(1) GWB). Legal transactions that breach this prohibition are invalid, subject to narrow exceptions. Implementing a notifiable deal without clearance can also lead to fines, and the Federal Cartel Office can open divestiture proceedings. These risks are explained in more detail in our article on gun jumping risks in German deals. Because the test depends on judgement rather than simple numbers, documentation of the analysis is important, both for internal governance and in case the authority later asks why no filing was made.

The transaction value threshold in the European context

German merger control does not apply where the European Commission has exclusive jurisdiction under the EU Merger Regulation (§ 35(3) GWB). Deals that meet the EU turnover thresholds are therefore filed in Brussels, not in Germany. Below the EU thresholds, national rules such as the German transaction value threshold have become more important since the Court of Justice of the European Union ruled in Illumina/Grail in September 2024 that the Commission cannot accept referrals under Article 22 of the Merger Regulation from member states that have no jurisdiction under their own national law. Where Germany does have jurisdiction, for example under § 35(1a) GWB, a referral request to the Commission remains possible.

As a result, the German transaction value threshold can be the gateway for a European review of so-called killer acquisitions. Buyers of innovative companies should therefore assess German jurisdiction not only in isolation, but as part of a multi-jurisdictional analysis that also considers Austria’s comparable test, call-in powers in other member states and foreign investment screening. Our articles on the CJEU Illumina/Grail judgment and on below threshold deals after Illumina discuss these developments, and our article on FDI filings in Germany covers the separate investment screening regime.

A checklist for deal teams

Deal teams can approach the test in a structured way. First, confirm the turnover figures of the buyer group and the target, including the target’s German turnover. Second, calculate the consideration, including earn-outs, assumed liabilities and connected payments, and document the assumptions. Third, gather evidence of the target’s activities in Germany: users, customers, downloads, data processing for German customers, research facilities, licences and marketing. Fourth, assess the result in light of the Meta/Kustomer principles rather than the original 2022 guidance alone.

The transaction documents should then reflect the outcome. If a filing is required or likely, the signing and closing structure must include a merger control condition and an appropriate long-stop date. If the parties conclude that no filing is required, the reasoning should be recorded. Illustration: a US software group acquires a European start-up for EUR 600 million; the start-up has German revenue of only EUR 3 million but processes data for several large German customers through its cloud platform. Following Meta/Kustomer, the buyer treats the domestic activity as significant, files in Germany and makes clearance a closing condition.

Two further points are often overlooked. First, the transaction value threshold applies to every form of concentration under German law, including the acquisition of a minority stake of 25 percent or more and the acquisition of competitively significant influence, not only to the acquisition of control. Second, the relevant turnover figures are those of the last business year before the concentration, so a deal signed early in a year may need to be checked again if closing is delayed and new financial statements become available.

How TRW & Co helps with the transaction value threshold

We advise buyers, sellers and investors on whether the transaction value threshold applies, including the calculation of the consideration, the assessment of domestic activity and the documentation of the analysis. Where a filing is needed, we prepare the notification and coordinate it with other merger control and foreign investment filings, and we structure signing and closing to manage suspension risks. Our merger control and M&A teams work together on these matters. To discuss a transaction, contact us. This article provides general information and is not legal advice.