Buying a GmbH – What Entrepreneurs Should Consider

Are you looking to buy a GmbH? Whether to expand your own business, enter a new market segment, or as an alternative to starting a company from scratch—the purchase of a GmbH offers many opportunities. However, it also involves risks and pitfalls. In this article, you will learn what to watch out for when buying a GmbH and what options are available to you.

Why Buy a GmbH?

Buying an existing GmbH has several advantages over founding a new company:

• Faster Start: An existing GmbH already has infrastructure, customers, and suppliers in place. You can get started immediately without having to build everything from scratch.

• Established Market Position: A GmbH that has been operating for some time has built a reputation and trust. This facilitates market entry and the acquisition of new customers.

• Experienced Team: When acquiring the GmbH, you also take on the employees along with their know-how and experience. This saves time and costs related to recruitment and onboarding.

• Better Financing Opportunities: A GmbH with a solid balance sheet and a positive track record finds it easier to secure loans or attract investors compared to a startup without a history.

Of course, there are also disadvantages and risks. As a buyer, you take on the GmbH’s “legacy issues” — whether legal obligations, customer problems, or technological shortcomings. This makes thorough due diligence and valuation of the target company all the more important.

What Types of GmbHs Are There?

If you want to buy a GmbH, you basically have two options:

1. Purchase of an Operating GmbH: This is the “classic” case. You take over an existing company with everything that comes with it — from employees and contracts to assets. The purchase price is based on the company’s value, which is determined by various factors such as revenue, earnings, market position, and future potential.

2. Purchase of a Shelf Company (also known as a “shell company”): This is an “empty shell” — a GmbH that has been formally established but has not yet started any operational activities. Shelf companies are created “in advance” by specialized providers and then sold to interested parties. The advantage: you save the time and formalities of founding a new company and can use the GmbH immediately for your purposes. However, you do not acquire an established business and must build the operations from scratch.

A special form of the shelf company is the “mantle company.” This is a GmbH that was previously operational but has ceased business activities and now exists only as a “shell.” By purchasing a mantle company, you may be able to assume tax losses or other benefits. However, caution is advised as hidden risks may also be present.

Which option is right for you depends on your goals and circumstances. Do you want to continue and expand an existing business? Then buying an operating GmbH makes sense. If you want to implement your own business idea and only need a “shell” for it, a shelf company might be the better choice.

How Does a GmbH Differ from a Mini-GmbH (“MBH”)?

An important distinction when buying a GmbH is between the “classic” GmbH and the so-called Mini-GmbH or MBH. The latter is a variant of the GmbH introduced in 2004 that offers some simplifications:

• Lower Share Capital: While the classic GmbH requires a share capital of €25,000, the MBH can be founded with as little as €1. However, the MBH must allocate 25% of its annual profit to reserves until the share capital of €25,000 is reached.

• Simplified Formation Process: The formation of an MBH is somewhat simpler and faster than that of a classic GmbH. For example, registration with the commercial register can be done without notarization.

• Limited Liability: Shareholders of an MBH are also only liable up to their contribution, not with their private assets. However, there are exceptions, such as in cases of insolvency or over-indebtedness.

In practice, the MBH has not become widespread. Most founders still choose the classic GmbH because it conveys more seriousness and solidity. The MBH variant also plays little role when buying a GmbH.

How Do I Buy a GmbH?

Buying a GmbH is a complex process that must be carefully planned and executed. Here are the key steps:

1. Define Goals and Criteria: First, consider what you want to achieve by buying a GmbH and what criteria the target company must meet. Are you aiming for growth, synergies, or entry into a new market? What industry, size, and profitability should the GmbH have?

2. Research and Preselection: Search for GmbHs that meet your criteria. You can use databases, online marketplaces, associations, or networks. Business consultants, M&A advisors, or lawyers can also assist in the search. Create a long list of potential candidates.

3. Contact and Confidentiality: Reach out to the target GmbHs and arrange a confidentiality agreement (NDA). This commits both parties to not disclose sensitive information to third parties. Only then can you openly discuss purchase intentions and details.

4. Information Gathering and Analysis: Request further information from the interesting GmbHs — from financial reports to contracts and employee and customer data. Analyze this information carefully and assess the opportunities and risks. Seek external expert advice as needed.

5. Company Valuation and Price Determination: Determine the value of the GmbH you want to buy. Various methods exist, such as income approach, discounted cash flow, or multiplier methods. Engage experienced valuers to assist you. Based on this, you can submit an indicative purchase offer.

6. Due Diligence and Negotiation: If your offer is of interest, a due diligence process follows — a detailed examination of the GmbH by external experts. All relevant aspects such as finance, legal, tax, and technical matters are reviewed and evaluated. Simultaneously, negotiate the final purchase price and terms with the sellers.

7. Contract Drafting and Closing: Once all questions are resolved and negotiations concluded, contracts are drafted. These include the purchase agreement and, if applicable, additional agreements such as shareholder agreements, service contracts, or transition arrangements. The purchase is completed upon signing the contracts and transferring the shares.

8. Integration and Transformation: After closing, the real work begins — integrating the acquired GmbH into your company. This includes merging structures, processes, and systems as well as culturally integrating employees. Depending on strategy, transformation or restructuring of the GmbH may also be necessary.

As you can see, buying a GmbH is no walk in the park but a demanding project. Professional preparation and support by experienced experts are therefore crucial. With the right strategy, planning, and execution, buying a GmbH can also be a great opportunity — for growth, innovation, and success.

Conclusion

Buying a GmbH is an attractive option for entrepreneurs who want to grow quickly, open new markets, or leverage synergies. They can choose between an operating GmbH with an active business and a shelf company as an “empty shell.”

In any case, careful planning, due diligence, and valuation of the target GmbH are essential. Only those who understand and accurately assess the opportunities and risks can negotiate a fair purchase price and avoid unpleasant surprises.

Legal and tax aspects should not be underestimated either. Buying a GmbH is a complex transaction with many pitfalls. Therefore, involving experienced lawyers, tax advisors, and auditors is vital.

Last but not least, buying a GmbH requires smart management of integration and transformation. Only if the strengths of both companies are combined and employees are brought on board can the acquisition reach its full potential.

In this respect, buying a GmbH is not a simple decision but an entrepreneurial challenge. Those who approach it with foresight, expertise, and commitment can elevate their business to a new level and achieve long-term success.

Do you have questions about buying a GmbH or are you looking for professional support for your project? Contact us — we are happy to advise you and find the best solution for you and your company.