Cross-Border Acquisition: Lessons from a Healthcare Robotics Transaction

In 2024, we advised on the cross-border acquisition of a Czech technology company by a foreign buyer. The target developed robotic solutions for healthcare, specifically assistive systems for rehabilitation. The buyer was a mid-sized foreign group.

Nine months passed between first contact and closing, although six had been planned. In this article I describe what held us up and what we took away from it. Names and identifying details have been changed.

¶ Phase 1: Structuring the deal and why we abandoned the original model

The buyer arrived with a clear plan: acquire 100% of the shares in the target through its Czech subsidiary. Simple and fast.

Within the first few weeks it became clear that this structure would not work. There were several reasons.

First, the target had two founders, and one of them wanted to stay on as technical director. A straightforward purchase of 100% of the shares would have cut every ownership link between him and a company he had largely built himself, and his motivation would have fallen apart.

Second, part of the intellectual property belonged not to the target but to one of the founders personally. These were patent applications filed before the company was even formed, and nobody had ever formally completed their transfer to the company.

Third, there was the grant. The target was drawing money from an innovation support programme, and a change in its ownership structure during the project's sustainability period required the grant provider's prior approval. Without it, the full grant would have had to be repaid.

Instead of a plain share deal, we therefore built the transaction on three elements: a purchase of 70% of the shares with an option on the remaining 30% once the grant sustainability period expired, a separate transfer of the intellectual property from the founder to the company, and a management contract with the founder who was staying on.

The lesson: the structure a buyer arrives with is only a starting point. The legal circumstances of the target will always reshape it in some way.

¶ Phase 2: What Czech law requires and foreign buyers don't expect

The foreign buyer had completed acquisitions in Germany, Austria and Switzerland and assumed the Czech legal framework would be similar. Broadly it was, but it differed in a number of details, and those details delayed the transaction by weeks.

Verified signatures. In the Czech Republic, a contract transferring a share in a limited liability company must be in writing with officially verified signatures (Section 209(2) of the Business Corporations Act). The buyer did not know this and had expected to close the whole transaction electronically. Verifying signatures abroad, translating documents and obtaining apostilles took an extra three weeks.

Foreign investment screening. Since May 2021, the Ministry of Industry and Trade has screened investments by buyers from outside the European Union or controlled from outside it (Act No. 34/2021 Coll.), which was the case with our buyer. In selected sectors, such as military equipment, critical infrastructure, regulated services subject to higher obligations or dual-use items, prior authorisation is required. For other investments, the ministry may review the transaction of its own motion for up to five years after completion, unless the investor voluntarily applies for a consultation beforehand. The target operated in medical technology, so we had to decide how to deal with this risk. Talks with the ministry took six weeks, which the buyer had not allowed for at all.

Employee data protection. During due diligence, the foreign buyer wanted to look through the personal files of the target's employees. The GDPR did not allow this to the extent requested, because there was no legal basis for passing employees' personal data to the buyer. Employee consent hardly holds up in an employment relationship, and legitimate interest covers only the data necessary to assess the transaction. We therefore had to find a solution under which the buyer received the information it needed in anonymised form.

The lesson: there is no such thing as a "standard" cross-border acquisition. Every jurisdiction has its particularities, and if you do not prepare for them, they can cost you weeks or even months.

¶ Phase 3: Integration, contracts and employees after closing

The transaction closed in December. That did not end the work; in many respects, it had only just begun.

Contract rewrites. The target had around thirty active commercial contracts with hospitals, rehabilitation centres and distributors. Most contained a change-of-control clause or at least a notification obligation. We had to go through each contract individually, notify the counterparty and in several cases negotiate new terms. Two contract partners seized the opportunity and secured better prices.

Employees. Integrating the people proved more sensitive than the buyer had expected. The target's employees were used to a start-up culture with flexible hours, informal communication and decisions taken in a small team. The buyer had a corporate structure with fixed reporting lines, approval processes and compliance programmes. Two key developers resigned within the first three months after the acquisition. How to keep them should have been addressed better, and earlier.

Tax optimisation. The buyer planned to move part of the R&D function to its parent company. That, however, affected transfer pricing as well as the target's ability to claim the Czech R&D tax deduction. Coordination with tax advisers on both sides took another two months.

¶ What we would do differently

Looking back, I see three things we would tackle right from the start next time.

Key employee retention programme. It should have been agreed and announced to employees before closing. Losing two developers cost the buyer more than the entire due diligence.

Regulatory screening up front. Foreign investment screening and grant conditions should have been mapped in the preparatory phase, not during due diligence. That would have saved six weeks.

Simpler transaction documentation. The buyer insisted on an extensive share purchase agreement (SPA) on a common-law template. The result was a fifty-page document that had to be translated into Czech for the verification of signatures and the filing with the commercial register. More compact documentation adapted to Czech legal practice would have served better.

In a cross-border acquisition, two legal systems and two corporate cultures meet, and each side expects something different. It is therefore not enough for every step to be legally correct. Both sides have to be aligned and prepared for what lies ahead.

The transaction succeeded in the end. The target is operating, developing new products and growing. But it took three months longer and cost hundreds of thousands of crowns more than it needed to, and that is why I am writing about it.

The areas we review in due diligence, and why, are described in Due diligence: what we look for when you buy a company. The internal set-up of the target is the subject of Articles of association are not a formality.