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What Are Mergers And Acquisitions? How It Works In The Netherlands 

Thinking of starting a business in the Netherlands? Look no further! Not only do you have tremendous number of options, but you can even opt to purchase an existing venture – a perfect way to crucially cut down on initial investments. 

To get started, seek guidance from the Dutch law office who will guide you through the acquisition process and help make sure that your investment is a wise one.

What Are Mergers And Acquisitions?

Mergers and acquisitions are the strategic union of two businesses that generates more value than the original entities could have achieved alone. Through combining forces, these companies maximize efficiencies, boost sales, provide better organizational structure and increase capabilities; all key ingredients for a successful enterprise. 

Mergers observe an even-handed partnership between the counterparts with both parties coming together as equals. On the other hand, acquisitions involve one business purchasing another, either in a cordial or confrontational manner depending on whether the purchased company would benefit from being part of a larger unit. 

In either case, the result is finalized and the relationship between the old and new businesses are born.

How Does It Work In The Netherlands?

If you plan to start a company in the Netherlands, a merger or acquisition may be a good option, especially if you want to avoid the stress of launching and registering a company in the Netherlands. If you want your company formation in the Netherlands to be seamless, consulting experts will be a prudent choice. These experts will offer you all-round support from start to finish. Once operational, you will have access to all of the resources you require to succeed, which include continual administrative and managerial strategies.

The primary organization in charge of all actions connected to mergers and acquisitions of business in the Netherlands is the Dutch Competition Authority (NMA). The NMA is dedicated to preserving market competitiveness in the Netherlands. 

The authority: 

  • Reviews mergers and acquisitions
  • Pursues actions against behaviors constituting an abuse of a  position
  • Conducts investigations into and penalizes cartels. 

However, here are a few things to note before the merging or acquisition of a company in the Netherlands.

  • Business Support

The NMA’s merger control policy is in line with European competition law, which gives all operations linked to merger and acquisition in the Netherlands an added boost of confidence and trust.

  • Taxation

A Dutch resident business must pay CIT on all of its worldwide revenue. However, some income may be excluded from taxation. Only a small tax is due from non-resident entities on revenue from Dutch sources. For investors who will have to register a company in the Netherlands, their corporate tax rate will differ by the amount of income they generate.

  • Compliance Services

Hiring a compliance service may be an extra cost, but it is essential. You’ll be able to learn more about the procedures for customer interaction, verification, and due diligence. Staying in compliance with your regulatory obligations is simple. An acquiring corporation can discover, analyze, and evaluate a target company’s compliance risk profile using M&A compliance to spot any warning signs that could result in successor liability.

  • Corporate Services

Investors are often compelled to do business in the Netherlands because of its growing economy. However, knowing the laws and systems guiding businesses is essential before registering a company in the Netherlands. You can always hire a corporate service agent to learn the rules and prepare all necessary documents. 

Steps In Merging And Acquisition In Netherlands 

1. M&A Objective 

When business owners are looking to sell their company, they must make prudent financial, legal, and administrative decisions that can take months or even years to properly implement. 

To maximize the value of the target business during an M&A process, one must employ strategies like increasing the amount and quality of sources funding, collecting unpaid invoices, settling any outstanding debts, and cutting wasteful spending in order to strengthen the balance sheet. 

Having a reliable Dutch M&A lawyer can help oversee these efforts, as well as identify potential buyers.

2. Teasers And Business Value 

Crafting an enticing teaser, the seller begins their second phase to evaluate the business’s worth. This precise and informative commercial financial synopsis is enriched by licenses issued from the country’s businesses registry and regulatory entities. 

By providing this comprehensive overview, prospective buyers will gain insight into the company and its services, prompting them to contemplate further action. Consequently, customers chosen for the third round can look forward to signing a Non-Disclosure Agreement (NDA) with other parties. 

With the intention of inspiring preliminary conversations and fostering relationships, the teaser is sent out to strategic and financial investors.

3. Dutch Law Non-Binding Offer Or Letter Of Intent

The third stage of acquisition/merger of the company in the Netherlands is critical because this stage is where most deals are made or lost. The major tenets of a potential value are explored here, if there, given the mutual interest from the preliminary discussions. This stage covers the following subjects:

  •  Acquisition structure (sale of shares or assets)
  •  Acquisition cost
  • The management’s post-acquisition responsibilities
  • The acquisition process’s timetable.
  • The transaction cost

The results of these negotiations are usually signed in a letter of intent (LOI) or other contract-like forms governed by Dutch law. These contracts are written with the intention that the buyer and seller will want to know the direction in which the parties are headed. Although, they are not immediately required to be legally bound.

4. Due Diligence 

Starting the fourth step of the due diligence process, the seller prepares a comprehensive data room with all the essential information about the target firm. 

Due diligence is an obligation on the part of the seller to bring forth pertinent key details, and can also be seen as a customary practice utilized by buyers to evaluate the commercial, financial, legal, and operational aspects of a company. 

Therefore, it’s highly recommended that buyers seek the help of external Dutch financial, legal, and tax experts to ensure the accuracy and reliability of their due diligence.

5. Documents Signing, And Closure Of Transactions Under Dutch Corporate Law

The buyer often provides the first drafts of the Dutch law transaction documents if the due diligence does not reveal deal-breaking difficulties for the buyer.

The SPA is the leading contract if the firm is sold via a share transfer (the share purchase agreement). However, the main contract is an APA if the business acquisition is set up as a transfer of assets and liabilities (asset purchase agreement).

Timeline for Dutch company Formation 

The following sections comprise the timeline for the company registration process:

  • Choosing and booking a company online
  • Drafting and notarizing the company’s incorporation documents
  • Registering the company with the Dutch Companies Registrar and getting the tax identification number
  • Registering with the tax bodies for the purpose of social security. You can get prior consultation from a tax advisor in the Netherlands before full tax registration.

Conclusion

Mergers and acquisitions in the Netherlands offer a great potential for entrepreneurs looking to start a business without having to go through the trouble of building one from scratch. If done right, it can be an especially effective form of business growth with minimal risks. 

However, there are important steps that need to be followed and legal counsel should always be sought so as to ensure the proper execution of these vital steps and avoid any costly mistakes. With a little bit of planning, an understanding of the market, and the right professionals by your side, you can embark on your journey towards success with ease!

FAQs 

Are Mergers Subject To Approval?

Mergers are business deals in which two or more companies are combined into one. The Netherlands Dutch law controls whether shareholders must approve a merger. However, most of the target company’s shareholders who own outstanding shares must typically consent to a merger.

Why Are M & A Deals Popular?

M & A is a rewarding career path and may appeal to you because you get to influence critical financial decisions. In decisions involving significant stakeholders in the sector, M&A specialists often act as mediators.

What  Happens If I Miss The Dutch Tax Deadline?

You will be subject to penalty by the Tax and Customs Administration if your tax return is submitted late. The Tax and Customs Administration will give the last reminder before imposing a fine. However, you can request a postponement if you cannot file your tax return by the deadline.

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