Insights and Analysis

No value in the future? The twists and turns of Germany’s transaction value threshold

12 March 2025

Key takeaways

Narrower scope, clearer lines: In a string of rulings, the German Federal Cartel Office (“FCO”) has seen its broader interpretation of the transaction value threshold curtailed. These decisions should, for the time being, offer more predictability, particularly for companies operating in mature markets where turnover is a primary indicator of a target’s competitive potential. Judges have reinforced that in established industries, turnover remains a dependable gauge of genuine market presence.

“Killer acquisitions” on shaky ground: Attempts to invoke the transaction value threshold on the basis of speculative future domestic activities or intangible assets rest on shaky ground. While the court decisions do not consider the prevention of “killer acquisitions” obsolete, they clarify that they can only be caught by the transaction value threshold if they truly involve innovative, disruptive targets whose potential isn’t captured by turnover alone. Merely wielding a hefty valuation won’t suffice.

Legal uncertainties linger: But judicial curtailment of expansive enforcement does not resolve all questions. A pending Supreme Court appeal, as well as potential shifts in the law, mean the future application of the threshold remains in flux. Dealmakers must still navigate a patchwork of evolving precedents and unpredictable regulatory interpretations.

Once hailed as Germany’s silver bullet against "killer acquisitions," the transaction value threshold has endured a bumpy judicial ride. Recent court decisions curtailing expansive interpretations by the German Federal Cartel Office have offered clarity—but uncertainties remain. With the Supreme Court poised to weigh in and legislative shifts looming, companies must now navigate a landscape where tomorrow’s potential no longer guarantees regulatory scrutiny today.

Chapter 1

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1. Merger Control has its Value – A brief History of the Transaction Value Threshold

Merger control in Germany has traditionally been tethered to turnover-based thresholds, which offer a straightforward way to determine whether a transaction must be notified to the FCO. A transaction must be notified if the combined worldwide turnover of all undertakings concerned exceeds a certain threshold (currently €500 million), one undertaking is exceeding a certain turnover within Germany (currently €50 million), and another undertaking also exceeds a certain amount of German turnover (currently €17.5 million).Yet, beginning in 2017, a new threshold—based on the overall value of a deal—was introduced. On that basis, even if the second undertaking's turnover in Germany is below €17.5 million, notification is now required if the transaction value exceeds €400 million and the target has “significant domestic activities” in Germany.

The transaction value threshold was lauded, above all else, as a decisive measure to prevent so-called “killer acquisitions.” This term gained currency in competition law circles to describe deals where an established market player acquires a small but ground-breaking rival, motivated less by synergies and more by eliminating an emerging competitive threat. Since turnover in such scenarios may be low (often by virtue of the target’s youth or novel business model), traditional turnover-based thresholds could fail to capture the acquisition. Lawmakers envisaged the new threshold to catch a modest number of high-stakes transactions each year, particularly in cutting-edge digital and life sciences sectors, where the usual turnover thresholds might fail to reflect a target’s true competitive significance. The legislative aspiration was to closely monitor potentially transformative deals without placing undue burdens on companies operating in stable, mature markets.

And while, arguably, the new provision has reached its goal of triggering reviews of meaningful transactions in nascent sectors – recently even resulting, for the first time ever, in an in-depth review of a biotech transaction, this milestone stands against the backdrop of several dozen filings each year now being made solely because of the transaction value threshold. This development was linked to the FCO adopting a rather expansive view of what constitutes “substantial domestic activities,” seeking jurisdiction over deals where the target’s German footprint appeared negligible. Many businesses, unsure whether their transactions were truly covered, opted to notify preemptively – alerted also by the fact that the FCO appeared to actively monitor the market in search of cases it deemed eligible candidates for a “value based” review. As a consequence, deals that once seemed too small to register for lack of German revenue suddenly found themselves under the specter of in-depth reviews.

Chapter 2

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2. Fine Line and Defining Line – Markets in Bloom or Markets in Full Flower?

However, a trio of rulings from the Higher Regional Court of Düsseldorf (“the Court”) has sharply curtailed that approach.

The first of these judgments arrived in 2022 – in a case stemming from an explicit FCO decision ordering the parties to submit a merger notification because of the transaction value threshold, a move previously unheard of. In that case, the Court rejected the notion that a target’s peripheral handling of data belonging to end-consumers in Germany – while under contract to foreign-based clients – amounted to “significant domestic activities.” The judges clarified that the real question is where (and to whom) a company actively provides services. According to this logic, intangible assets like user data do not, on their own, establish a meaningful domestic presence if there are no robust local operations, staff, or direct customers in Germany.

And in late February 2025, the Court has dealt two further blows. The two decisions are not yet publicly available, but it is clear from the Court’s press release that in each case, the judges found the authority had overreached by treating high deal values as a fallback basis for reviewing transactions in mature markets – a result that is particularly remarkable in view of the fact that the FCO’s review concerned acquisitions which it had caught only retroactively by initiating “unbundling procedures” (Entflechtungsverfahren) years after the transactions had been closed.

Specifically, the Court held that if turnover already provides a reliable measure of the target's competitive potential, low German revenues cannot simply be disregarded by invoking the overall transaction value. While this principle is generally acknowledged by the FCO in its guidance on the transaction value threshold (see here, para. 82), the authority appeared to reach a contrary conclusion in the cases at hand. However, the Court rejected this position, emphasizing that both target companies had already been commercially marketing their software products for approximately ten years in mature markets, including Germany. Consequently, the Court concluded that the turnover figures sufficiently reflected their existing market positions.

Moreover, the Court has once again curtailed the FCO's expansive interpretation of the criterion of "significant domestic activities." The judges conducted a thorough evaluation of the companies’ current domestic activities at the time of the transaction, including local presence, employee numbers, customer base, and German turnover. They found that these factors, even collectively, did not demonstrate "significant" domestic activity. Specifically, the Court held that any perceived discrepancy between the transaction value and the targets’ current German revenues was inadequate evidence of significant domestic activities. In other words, while the transaction value may reflect the purchaser's valuation of the target, indicative of future potential, German merger control only applies if these prospects are already concretely manifest within the German market. Merely projecting significant domestic activities for the future is insufficient.

The judicial message emerging from this decision is unequivocal: the transaction value threshold must remain a narrowly tailored instrument. Efforts to force conventional, revenue-based targets into the "killer acquisition" category will face judicial resistance. The threshold does not provide regulators carte blanche to initiate merger reviews of transactions merely because they have substantial valuations yet modest German turnover. Given that the Court serves as the sole appellate instance for FCO decisions, this interpretation now establishes a "new normal" for applying the transaction value threshold—subject, however, to further review by Germany's highest court, a process the FCO has already initiated (see Section 3 below).

Chapter 3

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3. Between Court Tussles and Legislative Shifts – The uncertain Path ahead

While this is good news for companies considering M&A activities with a German nexus, the line between “markets in bloom” and those in “full flower” remains somewhat subjective. High-tech startups in a phase of accelerated growth or companies launching radically new products may still rightfully trigger value-based scrutiny, especially if domestic turnover has yet to reflect the potential surge in user adoption or novel monetization strategies. The Court leaves open the door for robust oversight in fields where turnover lags behind fast-evolving innovation and the substantial domestic activities by the target have already materialized so that speculation as to its future prospects in the German marketplace are not necessary.

And even more importantly, the Court’s rulings have not settled the fate of the transaction value threshold as such. While in particular companies in mature sectors may find relief in the courts’ decisions, the legal landscape remains fluid – including in relation to other avenues which competition authorities in Germany and elsewhere in Europe might pursue to “catch the killers”.

There is growing consensus among a number of policymakers that the existing rules do not provide for a sufficiently tight net. In the wake of the Illumina/Grail fallout at the European level, which thwarted the European Commission’s aspirations of gaining a flexible tool to review transactions that would fly under the radar of turnover-driven merger regimes, there is now talk of introducing discretionary powers for competition authorities to just “call in” certain mergers or to introduce a transaction value test in the Commission’s merger regulation – thus side-stepping any limitations that provisions like the German transaction value threshold may be found to have.

And while not all Member States are sold on one of these ideas specifically, prominent voices in Germany’s Federal Ministry for Economic Affairs and Climate Action have openly floated lowering the national deal-value threshold and expanding it to targets that are “likely to become active” in Germany within a near-future window. The rationale is straightforward: capturing scenarios where a target’s significance will materialize tomorrow, not just those where it already manifests today. Put differently (and a bit poetically): A value test that cannot account for future value does itself not hold value in the future. This is a sentiment that clashes directly with the Court’s interpretation of the law in its current form and reflects Germany’s desire to close what competition watchdogs in the EU still perceive as a loophole – with the FCO’s head, Andreas Mundt, having repeatedly declared himself a fan of such more expansive transaction value test, arguing that it would provide clearer rules of the game compared to call-in powers. The FCO had appealed the Court’s 2022 ruling and if Germany’s Supreme Court ultimately rejects the FCO’s expansive reading, that backlash could well reignite the push for a fresh legislative package.

Such recalibration does not enjoy unanimous support though. Lots of stakeholders critique the uncertainty that would be brought about by a more expansive transaction value test, and worry that this could cause companies to shy away from investment opportunities. Startups, too, fear that an expanded test might hamper their ability to attract strategic buyers.

For dealmakers, this confluence of judicial rulings and prospective legislative amendments can be dizzying. On the one hand, courts have limited the authority’s ability to stretch the threshold in well-established markets. On the other, there is momentum in policy circles—reinforced by discussions in Brussels—to refine or expand deal-value rules so that promising yet still-small players do not fly under the radar. Whether these debates materialize into binding law depends on political will and ongoing EU-level deliberations, but the direction is clear: a more flexible and forward-looking approach to capturing “killer acquisitions” is and remains firmly on the agenda.

In the meantime, companies contemplating high-value transactions must tread carefully. Where intangible assets, AI-driven platforms, pharma innovations, or fast-scaling digital tools are involved, it is wise to engage in early consultations with legal counsel. Parties should be prepared not only for the possibility of second-phase scrutiny but also for abrupt shifts in the rules themselves. Ultimately, while judges have reined in the German authority’s most expansive interpretations for now, the quest to tighten the grip of merger control in the EU presses on.

Authored by Martin Sura, Elena Wiese, and Florian von Schreitter.