IT Contracts in Asset Deals : The Clauses Buyers Overlook

Asset Deal versus Share Deal: The Transfer Problem

In a share deal, the buyer acquires the shares in the target company. The company itself -- and thus all its contracts -- continue to exist unchanged. In an asset deal, by contrast, individual assets and contracts are transferred. This means that every contract must be transferred to the buyer individually, and as a rule, the consent of the respective counterparty is required.

For IT contracts, this principle is particularly critical because IT infrastructure is today the operational backbone of virtually every business. If central software licences cannot be transferred after closing or cloud services cease to be available, business operations come to a standstill.

Software Licences: § 34 UrhG as an Obstacle

The Copyright Transfer Restriction

The German Copyright Act governs the transfer of usage rights in § 34 UrhG. As a general rule, a usage right may only be transferred with the author's consent. Although this consent may not be unreasonably withheld, in practice software licence agreements almost always contain their own provisions on transferability that overlay the statutory regime.

This means that even if § 34 UrhG permits a transfer in principle, the licence agreement may exclude it or attach additional conditions. In an asset deal, therefore, every individual software licence agreement must be reviewed for its transfer clauses.

The UsedSoft Decision and Its Limits

With its decision in UsedSoft/Oracle (C-128/11) of 2012, the CJEU extended the principle of exhaustion to online transmissions of software. According to this ruling, the resale of a software licence is generally permissible if the software was first placed on the market within the EU with the right holder's consent, a perpetual licence was granted, and adequate remuneration was paid. The original licensee must render their copy unusable before resale.

However, the applicability of the UsedSoft jurisprudence to M&A transactions is disputed. Particularly with volume licences, named-user licences, and customer-specific customisations, considerable legal uncertainties exist. The UsedSoft decision therefore provides no blanket protection for licence transfers in the context of an asset deal.

SaaS Contracts: The Change-of-Control Problem

Consent Requirements and Termination Rights

SaaS contracts (Software as a Service) are not purchased but concluded as ongoing contractual relationships. Their transfer generally requires the provider's consent (so-called consent to assignment). Studies show that approximately 85 per cent of all enterprise SaaS agreements contain a change-of-control clause.

These clauses can trigger various legal consequences:

• Consent requirement: The provider must consent to the transfer before the transaction can close
• Automatic termination right: The change in control entitles the provider to extraordinary termination
• Price adjustment right: The provider may renegotiate terms upon a change of control
• Notification obligation: The contracting party must notify the change of control within a defined period

Risk Assessment in Due Diligence

During IT due diligence, all SaaS contracts should be systematically reviewed for the following points:

• Is there a change-of-control clause?
• What legal consequence is triggered (consent, termination, price adjustment)?
• How high is the risk that the provider will refuse consent?
• What alternatives are available if the contract cannot be transferred?
• Is the data stored under the contract portable?

Cloud Services and Data Migration Obligations

Vendor Lock-in as Transaction Risk

Cloud infrastructure services (IaaS, PaaS) frequently involve vendor lock-in, which can become particularly problematic in an asset deal. Proprietary interfaces, specific data formats, and dependencies on particular cloud regions can significantly complicate and increase the cost of migration to a new infrastructure.

Data Migration and Data Portability

The GDPR grants a right to data portability in Art. 20. However, this right is directed at data subjects and is not directly applicable to business-to-business relationships. The contractual regulation of data portability is therefore crucial. The following points should be reviewed:

• In what format can data be exported?
• What deadlines apply for data handover after contract termination?
• Will data be securely deleted by the former provider after migration?
• Who bears the costs of data migration?

IP Ownership: Who Owns the Software?

In-House Developments and Commissioned Work

Before transfer, it must be clarified who actually owns the software. For in-house developments by the seller's employees, usage rights pass to the employer pursuant to § 69b UrhG -- unless otherwise agreed. For commissioned work by external developers, however, the contractual agreement is decisive. If there is no express grant of rights, the usage rights may remain with the contractor.

Open-Source Components

Particular caution is required with the use of open-source software. Certain licences -- particularly the GNU General Public License (GPL) -- contain copyleft clauses requiring that derivative works be published under the same licence terms. If the target company's proprietary software contains GPL-licensed components, this can have significant implications for the software's value.

§ 613a BGB: The Transfer of IT Teams

Automatic Transfer upon Business Transfer

In an asset deal, § 613a BGB may apply when a business or business unit is transferred. Pursuant to § 613a(1) BGB, the acquirer enters into the rights and obligations of the employment relationships existing at the time of the transfer. This also applies to the seller's IT department.

Specific Aspects for IT Employees

For IT teams, particular aspects apply:

• Knowledge holders: Key employees with specific system knowledge are often indispensable for continued operations. Their right to object under § 613a(6) BGB represents a significant risk.
• Non-compete clauses: Existing post-contractual non-compete clauses generally transfer to the acquirer and must be factored into calculations
• Retention measures: Retention bonuses and retention agreements for key IT employees should be negotiated before closing

The IHK Bremen explains the employment law consequences of business transfers in detail.

§ 25 HGB: Liability upon Business Continuation

A frequently overlooked risk in asset deals is liability under § 25 HGB. Whoever continues a commercial business under the previous firm name is liable with their entire assets for all liabilities of the former proprietor arising in the operation of the business. This liability extends to liabilities from the seller's IT contracts -- such as outstanding licence fees or maintenance arrears.

The most effective protection is the timely registration of a liability exclusion in the commercial register pursuant to § 25(2) HGB.

§ 453 BGB: The Purchase of Rights

Software licences and other intangible assets are transferred in an asset deal as a purchase of rights within the meaning of § 453 BGB. The provisions on the purchase of goods apply correspondingly. This has consequences for warranties: the seller is liable for the fact that the right sold actually exists and that it is free from third-party rights that the buyer does not have to assume.

In practice, this means that the seller should provide warranties as to the existence and transferability of software licences in the purchase agreement. The buyer should insist on specific IP warranties that go beyond the statutory provisions.

Vendor Consents: The Critical Path

Timing and Strategy

Obtaining vendor consents is frequently the critical path of the transaction. Large software providers such as SAP, Microsoft, or Oracle have their own M&A departments that review transfer applications according to standardised procedures -- this can take weeks or months.

Recommended approach:

1. Early identification: Identify all contracts requiring consent during due diligence
2. Prioritisation: Rank contracts by criticality for business operations
3. Parallel applications: Submit consent applications immediately after signing, not only after closing
4. Contingency planning: Develop an alternative solution for every critical contract
5. Closing condition: Anchor consents for business-critical contracts as closing conditions in the purchase agreement

Due Diligence Checklist for IT Contracts

The following checklist summarises the key review points for IT due diligence in an asset deal:

Software licences:

• Complete licence register with terms, conditions of use, and transfer clauses
• Reconciliation of actual usage with licensed volumes (compliance audit)
• Review for open-source components and their licence terms
• Identification of non-transferable licences and determination of alternative solutions

SaaS and cloud contracts:

• Inventory of all SaaS subscriptions with terms and notice periods
• Analysis of change-of-control clauses and consent requirements
• Review of data portability and migration options
• Assessment of vendor lock-in risk

Hardware and infrastructure:

• Inventory of all IT assets (servers, network infrastructure, end devices)
• Review of leasing and rental agreements for transferability
• Assessment of maintenance status and remaining useful life

Personnel and know-how:

• Identification of key IT employees and their contractual situation
• Review of existing non-compete agreements and confidentiality agreements
• Analysis of objection risk under § 613a BGB
• Planning of retention measures

Data protection and compliance:

• Review of GDPR compliance of all IT systems
• Assessment of existing data processing agreements
• Analysis of international data transfers

Conclusion

IT contracts are one of the underestimated risk sources in asset deals. Unlike share deals, they do not automatically transfer to the buyer but require individual review, consent, and contractual safeguarding. Thorough IT due diligence and the early involvement of specialists in IT law and copyright law are therefore not optional but mandatory.

At compleneo, we support you with IT-related legal due diligence in asset deal transactions -- from contract review through vendor communication to the drafting of transfer clauses in the purchase agreement. Get in touch with us.