Suggestions
Dr. Stefan Witte
Tech/Growth M&A and VC Lawyer - Experienced M&A lawyer, advising corp. clients, funds, investors and listed companies on all kinds of national & cross-border transactions, with a special focus on Tech/Growth M&A and VC
Dr. Stefan Witte is a Counsel at A&O Shearman, a prominent law firm. He specializes in Tech M&A (Mergers and Acquisitions) and Venture Capital, with a focus on advising corporate clients, funds, investors, and listed companies on national and cross-border transactions.24
Expertise and Focus Areas
Dr. Witte's primary areas of expertise include:
- Tech and Growth M&A
- Venture Capital
- General corporate law
- Capital markets law
He is known for his experience in handling complex transactions, particularly in the technology sector.34
Recent Involvement
Dr. Witte has been involved in significant deals, such as advising Kühne Holding AG on their strategic investment in Flix SE, a global mobility provider. In this transaction, he was part of the A&O Shearman team that assisted Kühne in acquiring a stake in Flix alongside global investment company EQT.1
Career Development
Allen & Overy strengthened its Corporate/M&A practice in Germany by attracting Dr. Witte, recognizing his expertise in tech M&A and venture capital.3 This move indicates his reputation and value in the legal industry, particularly in technology-related transactions.
Professional Engagement
Dr. Witte appears to be actively engaged in industry events and discussions. For instance, he recently commented on an AI networking event hosted by A&O Shearman's Silicon Valley office, which featured a panel of experienced investors from various industries.5
Dr. Stefan Witte's role as Counsel at A&O Shearman and his specialization in tech-related transactions position him as a key figure in the firm's corporate and M&A practice, particularly in matters involving technology companies and venture capital investments.
Highlights
... 𝑠𝑜𝑛𝑔𝑠 𝑠𝑡𝑢𝑐𝑘 𝑖𝑛 𝑡ℎ𝑒 ℎ𝑒𝑎𝑑 𝑎𝑓𝑡𝑒𝑟 𝑎𝑛 𝐼𝑡𝑎𝑙𝑖𝑎𝑛 𝑠𝑢𝑚𝑚𝑒𝑟 ℎ𝑜𝑙𝑖𝑑𝑎𝑦...
... after last week's start with the all time classic "ti amo" (and the more or less related matching right in VC documentation), let's move on to another "Klassiker" (as legend Lothar Matthäus would probably call it):
𝐕𝐨𝐥𝐚𝐫𝐞, 𝐨𝐡 𝐨𝐡, 𝐂𝐚𝐧𝐭𝐚𝐫𝐞, 𝐨𝐡 𝐨𝐡 𝐨𝐡 𝐨𝐡! … just like this timeless Italian classic song suggests, founders sometimes dream of rising high with their ventures but then to fly (away) – but a 𝐟𝐨𝐮𝐧𝐝𝐞𝐫 𝐥𝐨𝐜𝐤-𝐮𝐩 agreement can keep them grounded for a while.
The essence of a founder lock-up is to 𝐞𝐧𝐬𝐮𝐫𝐞 𝐭𝐡𝐚𝐭 𝐟𝐨𝐮𝐧𝐝𝐞𝐫𝐬 𝐫𝐞𝐦𝐚𝐢𝐧 𝐜𝐨𝐦𝐦𝐢𝐭𝐭𝐞𝐝 𝐭𝐨 𝐭𝐡𝐞𝐢𝐫 𝐜𝐨𝐦𝐩𝐚𝐧𝐲 during the critical early stages. Prior to the end of the Vesting Period, generally known as the lock-up period, any transfer of shares by a founder requires certain approvals – quite common is the approval of a majority of shareholders and the majority of investors (generally being the new investors joining the relevant funding round). This mechanism is designed to prevent founders from exiting prematurely and to align their interests with the long-term success of the company.
𝐀𝐟𝐭𝐞𝐫 𝐭𝐡𝐞 𝐥𝐨𝐜𝐤-𝐮𝐩 𝐩𝐞𝐫𝐢𝐨𝐝, 𝐟𝐨𝐮𝐧𝐝𝐞𝐫𝐬 𝐠𝐚𝐢𝐧 𝐦𝐨𝐫𝐞 𝐟𝐫𝐞𝐞𝐝𝐨𝐦 𝐭𝐨 𝐭𝐫𝐚𝐧𝐬𝐟𝐞𝐫 𝐬𝐡𝐚𝐫𝐞𝐬, provided they comply with certain further provisions regarding the transfer of shares.
When drafting a founder lock-up, it has to be taken care that not only any direct transfer of shares by the founders, but also any 𝐜𝐢𝐫𝐜𝐮𝐦𝐯𝐞𝐧𝐭𝐢𝐨𝐧 through indirect means, such as transferring shares of a Founder Holding Entity, is not permitted without similar approvals.
𝐈𝐧 𝐭𝐡𝐞 𝐞𝐯𝐞𝐧𝐭 𝐨𝐟 𝐚 𝐛𝐫𝐞𝐚𝐜𝐡 𝐨𝐟 𝐭𝐡𝐞 𝐟𝐨𝐮𝐧𝐝𝐞𝐫 𝐥𝐨𝐜𝐤-𝐮𝐩, there should be significant consequences, including, e.g., a potential forced sale of the founder's shares at nominal value to (certain) shareholders.
For VCs and founders alike, understanding the nuances of founder lock-up agreements is 𝐜𝐫𝐮𝐜𝐢𝐚𝐥 𝐟𝐨𝐫 𝐦𝐚𝐢𝐧𝐭𝐚𝐢𝐧𝐢𝐧𝐠 𝐚 𝐡𝐞𝐚𝐥𝐭𝐡𝐲 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐜𝐥𝐢𝐦𝐚𝐭𝐞 𝐚𝐧𝐝 𝐞𝐧𝐬𝐮𝐫𝐢𝐧𝐠 𝐭𝐡𝐞 𝐬𝐭𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐨𝐟 𝐭𝐡𝐞 𝐯𝐞𝐧𝐭𝐮𝐫𝐞 during its formative years.
𝙄𝙛 𝙮𝙤𝙪 𝙖𝙧𝙚 𝙞𝙣𝙩𝙚𝙧𝙚𝙨𝙩𝙚𝙙 𝙞𝙣 𝙡𝙚𝙖𝙧𝙣𝙞𝙣𝙜 𝙢𝙤𝙧𝙚 𝙖𝙗𝙤𝙪𝙩 𝙩𝙝𝙚 𝒇𝒐𝒖𝒏𝒅𝒆𝒓 𝒍𝒐𝒄𝒌 𝒖𝒑 𝙖𝙣𝙙 𝙤𝙩𝙝𝙚𝙧 𝙖𝙨𝙥𝙚𝙘𝙩𝙨 𝙤𝙛 𝙑𝘾 𝙖𝙜𝙧𝙚𝙚𝙢𝙚𝙣𝙩𝙨, 𝙨𝙩𝙖𝙮 𝙩𝙪𝙣𝙚𝙙, 𝙖𝙣𝙙 𝙥𝙡𝙚𝙖𝙨𝙚 𝙖𝙡𝙬𝙖𝙮𝙨 𝙛𝙚𝙚𝙡 𝙛𝙧𝙚𝙚 𝙩𝙤 𝙘𝙤𝙣𝙩𝙖𝙘𝙩 𝙢𝙚 𝙖𝙣𝙙 𝙢𝙮 𝙘𝙤𝙡𝙡𝙚𝙖𝙜𝙪𝙚 Johannes Schmidt!
What does Italian music got to do with VC?
Probably not very much. But I still got some Italian songs stuck in my head, that - in a way - convey the basic idea of typical VC deal terms quite well.
Let's start with a classic song for a - actually not that classic - provision:
"𝗧𝗶 𝗮𝗺𝗼..." ...these are the words that a VC investor might want to say to a promising startup that is looking for additional funding. But what if another investor is also interested in the company and makes an attractive offer? How can the existing investor protect its stake and prevent the entry of a third party? This is where - amongst others - the 𝗺𝗮𝘁𝗰𝗵𝗶𝗻𝗴 𝗿𝗶𝗴𝗵𝘁 comes in.
The matching right is similar to a pre-emption right, but it 𝗮𝗽𝗽𝗹𝗶𝗲𝘀 𝘁𝗼 𝘁𝗵𝗲 𝗼𝗿𝗶𝗴𝗶𝗻𝗮𝗹 𝗮𝗰𝗾𝘂𝗶𝘀𝗶𝘁𝗶𝗼𝗻 𝗼𝗳 𝗻𝗲𝘄 𝘀𝗵𝗮𝗿𝗲𝘀, not the derivative transfer of existing shares. It grants the investor the 𝗼𝗽𝘁𝗶𝗼𝗻 𝘁𝗼 𝗺𝗮𝘁𝗰𝗵 𝘁𝗵𝗲 𝗼𝗳𝗳𝗲𝗿 𝗼𝗳 𝗮 𝘁𝗵𝗶𝗿𝗱 𝗽𝗮𝗿𝘁𝘆 𝗶𝗻𝘃𝗲𝘀𝘁𝗼𝗿 and subscribe to the new shares that would otherwise go to the third party. By exercising the matching right, the investor can increase its shareholding in the company and exclude the third party from becoming a shareholder (and prevent dilution of voting and economic rights).
So, a matching right can be a powerful tool for an investor to protect and enhance its stake in a company, 𝗯𝘂𝘁 𝗶𝘁 𝗮𝗹𝘀𝗼 𝗰𝗼𝗺𝗲𝘀 𝘄𝗶𝘁𝗵 𝘀𝗼𝗺𝗲 𝗿𝗶𝘀𝗸𝘀 𝗮𝗻𝗱 𝗰𝗵𝗮𝗹𝗹𝗲𝗻𝗴𝗲𝘀 𝗳𝗼𝗿 𝘁𝗵𝗲 𝗰𝗼𝗺𝗽𝗮𝗻𝘆 𝗮𝗻𝗱 𝘁𝗵𝗲 𝗼𝘁𝗵𝗲𝗿 𝘀𝗵𝗮𝗿𝗲𝗵𝗼𝗹𝗱𝗲𝗿𝘀. E.g., the company might lose the opportunity to attract a strategic or reputable investor that could add value to the business. Moreover, the matching right requires the company to disclose the terms and conditions of the third-party offer to all shareholders, which might affect the confidentiality and competitiveness of the negotiation process. Finally, the matching right might trigger complex and time-consuming procedures.
All in all: 𝗔 𝗺𝗮𝘁𝗰𝗵𝗶𝗻𝗴 𝗿𝗶𝗴𝗵𝘁 𝗶𝘀 𝗻𝗼𝘁 𝗮 𝗰𝗼𝗺𝗺𝗼𝗻 𝗳𝗲𝗮𝘁𝘂𝗿𝗲 𝗶𝗻 𝗩𝗖 𝗮𝗴𝗿𝗲𝗲𝗺𝗲𝗻𝘁𝘀 𝗶𝗻 𝗚𝗲𝗿𝗺𝗮𝗻𝘆, as it may deter potential new investors and limit the growth opportunities for the company. However, some investors may insist on having such a right to secure their position and influence in the company. If so, the matching right should be carefully drafted and balanced with the interests of all parties involved. In particular, the matching right should specify the minimum content and form of the third-party offer, the time frame and manner of exercising the matching right, and the consequences of exercising or not exercising such right.
𝙄𝙛 𝙮𝙤𝙪 𝙖𝙧𝙚 𝙞𝙣𝙩𝙚𝙧𝙚𝙨𝙩𝙚𝙙 𝙞𝙣 𝙡𝙚𝙖𝙧𝙣𝙞𝙣𝙜 𝙢𝙤𝙧𝙚 𝙖𝙗𝙤𝙪𝙩 𝙩𝙝𝙚 𝙢𝙖𝙩𝙘𝙝𝙞𝙣𝙜 𝙧𝙞𝙜𝙝𝙩 𝙖𝙣𝙙 𝙤𝙩𝙝𝙚𝙧 𝙖𝙨𝙥𝙚𝙘𝙩𝙨 𝙤𝙛 𝙑𝘾 𝙖𝙜𝙧𝙚𝙚𝙢𝙚𝙣𝙩𝙨, 𝙨𝙩𝙖𝙮 𝙩𝙪𝙣𝙚𝙙, 𝙖𝙣𝙙 𝙥𝙡𝙚𝙖𝙨𝙚 𝙖𝙡𝙬𝙖𝙮𝙨 𝙛𝙚𝙚𝙡 𝙛𝙧𝙚𝙚 𝙩𝙤 𝙘𝙤𝙣𝙩𝙖𝙘𝙩 𝙢𝙚 𝙖𝙣𝙙 𝙢𝙮 𝙘𝙤𝙡𝙡𝙚𝙖𝙜𝙪𝙚 Johannes Schmidt!
