Buying a factory in Germany

Many friends ask us about how to buy a ready-made factory or part of its shares in Germany. In this article from Wise Business Group, we briefly discuss the important points you should consider when buying a ready-made factory in Germany.

Important points to consider when buying a ready-made factory in Germany!

1. Compliance with laws and regulations

• Business type: First, make sure that the buyer has registered a valid legal entity, i.e., a limited liability company (e.g., GmbH, UG) or sole proprietorship (proprietorship with a business license – Gewerbe) in Germany to operate the factory.
• Regional laws and permits: Check that the factory complies with local laws and has the necessary operating permits.
• Environmental regulations: Germany has strict environmental laws. Assess whether the factory complies with laws regarding waste disposal, pollutant emissions, and energy efficiency.
• Safety and health compliance: The factory must comply with German occupational health and safety standards.

2. Financial assessment when buying a ready-made factory in Germany

• Purchase cost: At the time of purchase, in addition to the purchase price, be sure to consider transaction-related costs such as notary fees, taxes (real estate transfer taxes), and legal advice costs.
• Operating costs: Check the current costs such as public services, repairs and maintenance, insurance, and labor costs.
• Profitability analysis: Conduct a business due diligence process to assess the profitability of the desired factory in Germany. When doing so, also consider revenues, fixed costs, and market potential.
• Tax implications: Consult a good tax advisor in Germany to understand business and corporate taxes, VAT, and real estate taxes.

3. Business due diligence in Germany

• Ownership: Be sure to check the ownership of the factory property in Germany and ensure that it is free of any obligations or legal claims.
• Existing contracts: Review current contracts with suppliers, customers, or lessors of that factory.
• Inspection: Conduct a proper physical inspection of the factory facility to check structural issues, equipment status, and production and operation capacity.
• Employees contracts: If the factory has employees, check their contracts to understand the obligations under German labor laws.

4. Location Analysis of a Factory in Germany

• Accessibility: Be sure to assess the factory’s proximity to suppliers, customers, and transport networks (highways, ports, railways) in Germany or abroad.
• Local workforce: Consider the availability of skilled labor and related costs in the area.
• Proximity to the market: Ensure that the factory location supports the business strategy, whether for the domestic or international market.

5. Financing options for buying a ready-made factory in Germany

• Bank loans: German banks typically offer loans to entrepreneurs for industrial properties and business development. Check the requirements, interest rates, and repayment terms. (Of course, note that this facility will not apply to all investors. The bank pays close attention to your residency status in Germany, the past income of the factory, and its supply chain).
• Government incentives: Look for subsidies or government aid to purchase and operate industrial facilities, especially in economically weaker areas or environmentally friendly projects.
• Private investors: consider private investors or investment firms if more capital is needed.

6. Cultural and commercial issues

• Language barriers: If you are not fluent in German as a factory buyer, hiring a local consultant or translator is essential.
• Business etiquette: Become familiar with local German business practices and establish good relationships with suppliers, government officials, and financial institutions, directly or indirectly.

7. Obtaining professional help to buy a factory in Germany

• Real estate agent: Use a consultant specializing in industrial real estate to identify suitable factories in Germany.
• Lawyer: Hire a German lawyer to negotiate the contract, perform legal due diligence, and comply with regulations.
• Tax advisor: Consult a tax advisor to optimize the transaction from a tax perspective.
• Technical experts: Hire engineers to assess the factory’s machinery and infrastructure.

8. Planning to transfer the ownership of a factory in Germany

• Delivery period: Set a clear plan for operations transitioning, including staff training, IT systems, and inventory management.
• Restructuring or merging: Decide whether you will maintain the existing brand or integrate the factory into the existing business.

By following the above steps and benefiting from expert advice, you can complete the process of buying and transferring ownership of a factory in Germany. Your consultants at Wise Business Group will help you choose and buy a suitable factory in Germany.

An overview of eight key points for buying a ready-made factory in Germany

1. Compliance with laws and regulations: Ensure valid company registration (GmbH or UG), compliance with regional laws, obtaining environmental permits, and adherence to health and safety standards.
2. Financial assessment: Review the purchase and operation cost, factory due diligence, and tax implications with a financial advisor.
3. Business Evaluation: Check the property ownership, contracts, equipment status, employee contracts, and legal obligations of the desired factory in Germany.
4. Location Analysis: Assess accessibility, local labor, and proximity to markets.
5. Financing: Use bank loans and government incentives, or attract private investors to buy and develop the desired factory.
6. Cultural and commercial issues: Overcome language barriers, become familiar with business etiquette, and build effective relationships.
7. Obtaining professional help: Hire a real estate agent, lawyer, tax advisor, and technical engineer for expert guidance.
8. Ownership transfer planning: Develop a plan for transitioning operations, training employees, and deciding whether to rebrand or integrate.

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