Private Equity 2019 5Th Edition a Practical Cross-Border Insight Into Private Equity

The International Comparative Legal Guide to: Private Equity 2019 5th Edition A practical cross-border insight into private equity

Published by Global Legal Group, with contributions from:

Aabø-Evensen & Co Dentons Proskauer Rose LLP Advokatfirman Törngren Magnell DS Avocats Samvād: Partners Ali Budiardjo, Nugroho, Reksodiputro Eversheds Sutherland Schindler Attorneys Allen & Gledhill LLP (Luxembourg) LLP Solórzano, Carvajal, González, Pérez-Correa, S.C. (SOLCARGO) Ashurst Hong Kong Faveret Lampert Advogados Udo Udoma & Belo-Osagie Avance Attorneys Ltd Garrigues Van Olmen & Wynant Bär & Karrer Ltd. HBK Partners Attorneys at Law Webber Wentzel British Private Equity & Venture Capital Houthoff Association (BVCA) Johnson Winter & Slattery Zhong Lun Law Firm Bub Memminger & Partner Maples Group Consortium Legal Matheson Davis Polk & Wardwell LLP McMillan LLP Debarliev, Dameski & Kelesoska Morais Leitão, Galvão Teles, Attorneys at Law Soares da Silva & Associados Dechert LLP Pirola Pennuto Zei & Associati The International Comparative Legal Guide to: Private Equity 2019

General Chapters:

1 2019 and Beyond: Private Equity Outlook for 2020 – Ross Allardice & Dr. Markus P. Bolsinger, Dechert LLP 1

2 Private Equity Transactions in the UK: the Essential Differences from the U.S. Market – Nicholas Plant, Dentons 4 Contributing Editors Christopher Field & 3 Management Incentive Plans – The Power of Incentives – Eleanor Shanks & Rob Day, Dr. Markus P. Bolsinger, Proskauer Rose LLP 7 Dechert LLP 4 Alternative Exits: Legal and Structuring Issues in GP-Led Secondaries – Leor Landa & Publisher Oren Gertner, Davis Polk & Wardwell LLP 14 Rory Smith Sales Director 5 EU Sustainable Finance Rules Start to Affect Private Equity – Tom Taylor, Florjan Osmani British Private Equity & Venture Capital Association (BVCA) 20 Account Director Oliver Smith Country Question and Answer Chapters: Senior Editors Caroline Collingwood 6 Australia Johnson Winter & Slattery: Divesh Patel & Andy Milidoni 24 Rachel Williams 7 Austria Schindler Attorneys: Florian Philipp Cvak & Clemens Philipp Schindler 33 Sub Editor Jenna Feasey 8 Belgium Van Olmen & Wynant: Luc Wynant & Jeroen Mues 43

Group Consulting Editor 9 Brazil Faveret Lampert Advogados: Claudio Lampert & João F. B. Sartini 50 Alan Falach Published by 10 Canada McMillan LLP: Michael P. Whitcombe & Brett Stewart 58 Global Legal Group Ltd. 11 Cayman Islands Maples Group: Julian Ashworth & Patrick Rosenfeld 66 59 Tanner Street London SE1 3PL, UK 12 China Zhong Lun Law Firm: Lefan Gong & David Xu (Xu Shiduo) 74 Tel: +44 20 7367 0720 Fax: +44 20 7407 5255 13 Finland Avance Attorneys Ltd: Ilkka Perheentupa & Erkki-Antti Sadinmaa 84 Email: [email protected] URL: www.glgroup.co.uk 14 France DS Avocats: Arnaud Langlais & Gacia Kazandjian 93 GLG Cover Design F&F Studio Design 15 Germany Bub Memminger & Partner: Dr. Peter Memminger 101 GLG Cover Image Source 16 Hong Kong Ashurst Hong Kong: Chin Yeoh & Joshua Cole 108 iStockphoto 17 Hungary HBK Partners Attorneys at Law: Dr. Márton Kovács & Dr. Gábor Puskás 114 Printed by Ashford Colour Press Ltd 18 India Samvād: Partners: Vineetha M.G. & Ashwini Vittalachar 122 July 2019 19 Indonesia Ali Budiardjo, Nugroho, Reksodiputro: Freddy Karyadi & Anastasia Irawati 132 Copyright © 2019 Global Legal Group Ltd. 20 Ireland Matheson: Brian McCloskey & Aidan Fahy 140 All rights reserved No photocopying 21 Italy Pirola Pennuto Zei & Associati: Nathalie Brazzelli & Massimo Di Terlizzi 149

ISBN 978-1-912509-82-9 22 Luxembourg Eversheds Sutherland (Luxembourg) LLP: Holger Holle & José Pascual 155 ISSN 2058-1823 23 Macedonia Debarliev, Dameski & Kelesoska, Attorneys at Law: Dragan Dameski & Vladimir Boshnjakovski 162 Strategic Partners 24 Mexico Solórzano, Carvajal, González, Pérez-Correa, S.C. (SOLCARGO): Fernando Eraña & Carlos Eduardo Ugalde 169

25 Netherlands Houthoff: Alexander J. Kaarls & Vivian A.L. van de Haterd 176

26 Nicaragua Consortium Legal: Rodrigo Taboada & Andres Caldera 186

27 Nigeria Udo Udoma & Belo-Osagie: Folake Elias-Adebowale & Christine Sijuwade 192

28 Norway Aabø-Evensen & Co: Ole Kristian Aabø-Evensen 199

29 Portugal Morais Leitão, Galvão Teles, Soares da Silva & Associados: Ricardo Andrade Amaro & Pedro Capitão Barbosa 220

30 Singapore Allen & Gledhill LLP: Christian Chin & Lee Kee Yeng 228

Continued Overleaf

Further copies of this book and others in the series can be ordered from the publisher. Please call +44 20 7367 0720

Disclaimer This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations

WWW.ICLG.COM The International Comparative Legal Guide to: Private Equity 2019

Country Question and Answer Chapters:

31 South Africa Webber Wentzel: Michael Denenga & Andrew Westwood 236

32 Spain Garrigues: Ferran Escayola & María Fernández-Picazo 246

33 Sweden Advokatfirman Törngren Magnell: Sten Hedbäck & Vaiva Burgyté Eriksson 255

34 Switzerland Bär & Karrer Ltd.: Dr. Christoph Neeracher & Dr. Luca Jagmetti 263

35 United Kingdom Dechert LLP: Ross Allardice & Robert Darwin 271

36 USA Dechert LLP: John LaRocca & Dr. Markus P. Bolsinger 281

PREFACE

We are privileged to have been invited to preface the 2019 edition of The International Comparative Legal Guide to: Private Equity, one of the most comprehensive comparative guides to the practice of private equity available today. The Guide is in its fifth edition, which is itself a testament to its value to practitioners and clients alike. Dechert LLP is delighted to serve as the Guide’s Editor. With developments in private equity law, it is critical to maintain an accurate and up- to-date guide regarding relevant practices and legislation in a variety of jurisdictions. The 2019 edition of this Guide accomplishes that objective by providing global businesses leaders, in-house counsel, and international legal practitioners with ready access to important information regarding the legislative frameworks for private equity in 31 different jurisdictions. This edition also includes five general chapters, which discuss pertinent issues affecting private equity transactions and legislation. The fifth edition of the Guide serves as a valuable, authoritative source of reference material for lawyers in industry and private practice seeking information regarding the procedural laws and practice of private equity, provided by experienced practitioners from around the world. Christopher Field & Dr. Markus P. Bolsinger Dechert LLP chapter 20 ireland Brian mccloskey

matheson aidan Fahy

1 Overview will likely lead to more flexibility from PE funds in terms of both the structure and terms of transactions, with minority investments becoming more common. 1.1 What are the most common types of private equity transactions in your jurisdiction? What is the current 2 Structuring Matters state of the market for these transactions? Have you seen any changes in the types of private equity transactions being implemented in the last two to three years? 2.1 What are the most common acquisition structures adopted for private equity transactions in your jurisdiction? A broad range of private equity (“PE”) transactions are carried out in Ireland, the most common including leveraged buyouts, PE transactions are usually structured using a holding company refinancings, trade sales, bolt-on deals and secondary buyouts. (“Holdco”) and an indirect wholly-owned subsidiary of Holdco The volume of PE transactions increased in 2018. A noticeable (“Bidco”). Holdco is commonly owned by the PE fund and trend over the last 12 months has been the increase in the number of management, as majority and minority shareholders, respectively. secondary buyouts which historically had not been a common Holdco can take the form of an offshore vehicle, although it is feature of the Irish PE landscape. usually Irish or UK tax resident. Bidco’s primary role is to acquire and hold the target’s shares and it 1.2 What are the most significant factors encouraging or may also act as borrower under the debt facilities. For tax- and/or inhibiting private equity transactions in your financing-related purposes, it is common to have intermediate jurisdiction? holding companies inserted between Holdco and Bidco. For inbound investments, Bidco is typically a private limited Ireland delivers: liability company resident, for tax purposes, in Ireland. The ■ a low corporate tax rate – corporation tax on trading profits is jurisdiction of incorporation of Bidco can vary and may be onshore 12.5% and the regime does not breach EU or OECD harmful or offshore. tax competition criteria; ■ the regulatory, economic and people infrastructure of a highly-developed OECD jurisdiction; 2.2 What are the main drivers for these acquisition structures? ■ the benefits of EU membership and of being the only English-speaking jurisdiction in the eurozone; There are a number of factors which affect the acquisition structure ■ a common law jurisdiction, with a legal system that is broadly similar to the US and the UK systems; adopted in PE transactions. These drivers include: (i) the tax requirements, capacity and sensitivities of the PE house, management ■ refundable tax credit for research and development activity and target; (ii) the finance providers’ requirements; and (iii) the and other incentives; and expected profile of investor returns. ■ an extensive and expanding double tax treaty network, which includes over 70 countries, including the US, UK, China and Japan. 2.3 How is the equity commonly structured in private equity transactions in your jurisdiction (including institutional, management and carried interests)? 1.3 What trends do you anticipate seeing in (i) the next 12 months and (ii) the longer term for private equity transactions in your jurisdiction? PE investors typically use small proportions of equity finance to subscribe for ordinary or preferred ordinary shares in Holdco. The balance is generally invested as a shareholder loan (often structured Irish economic growth is expected to continue in 2019 – the Central as loan notes issued by Holdco), or preference shares. Bank of Ireland has recently forecasted economic growth of more than 4% this year, which follows growth of more than 5% in 2018. Management will generally subscribe for ordinary shares in Holdco This means that Irish businesses will remain attractive to both local representing between 5% and 15%, commonly referred to as “sweet and international PE investors. The competition between investors equity”. On some buyouts, key senior management with sufficient

140 www.iclg.com iclg to: private equity 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London and fiveyears. three between of period a after occur typically may vesting full and from buyout to termination. Vesting may be straight-line or stepped period the of length the to reference by value) market fair and cost of higher (i.e. price leaver” “good the to entitled be will employee departing the which for shares of proportion the regulate will that provisions vesting include also may documentation relevant The “good leaver” portionoftheproceedsreceivedbyhimorher. the reimburse to required be will documentation, relevant the of provisions material other or covenants restrictive example, for breaches, subsequently but leaver” “good a as treated been has who individual an whereby provisions clawback contain also may receive the lower of fair market value and cost. The documentation to expect may leaver” “bad a while shares his/her for value market fair and cost of higher the obtain commonly will leaver” “good A the on to information good leaver/badleaverprovisions. further payable for 2.6 leaver amount question See the leaver/bad manager. departing determine good will which include provisions, usually will Documentation portfolio on relevant shares the manager’s with company. employment a his/her acquire of compulsorily termination to fund PE the enabling provisions include invariably will documents Transaction the to allocated equity management. of range typical the for 2.3 question See below. 9.1 question at contained is exemption shareholders” “substantial the on detail Further period. holding particular a for held been has capital Irish from gains tax (“CGT”) only applies where a minimum 5% shareholding relief this as investments, minority of context Ireland’s of availability “substantial shareholders” the exemption should be borne in perspective, mind in the structuring tax a From leaver leaver/bad provisions maybesomewhatrelaxed. good shares, management for periods vesting stake, the of size the on Depending control. board have to unlikely is it given rights, veto on focused more PE be typically minority will Ainvestor vehicle. purpose special Irish established newly invest will a through investing position than rather entity minority existing an through a directly taking investor PE a Typically incentive plansortobecomeadditionalemployeeshareholders. management in participate to invited be may personnel key Other remain they that and to contractualrestrictions(seequestion2.5below). investor PE the incentivised to create further value. They will also typically sign up with sufficient aligned interests their make ensure remain to to group target the expected in investment usually financial are management Senior the institutionalstrip. in invest to required) (and/or permitted be also may so do to funds matheson © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London iclg to: privateequity 2019 In relationtomanagementequity, whatisthetypical 2.5 Ifaprivateequityinvestoristakingminority 2.4 acquisition provisions? considerations? what arethetypicalvestingandcompulsory range ofequityallocatedtothemanagement,and position, aretheredifferentstructuring the appointmentofdirectors. and shares of transfer the to regard with particularly arrangements, governance include may documents constitutional the addition, In the in of shareholderequity/debt. securities of transfer issuances further regarding provisions (iv) the and company; portfolio on restrictions (iii) house; PE the of conduct the for rights veto the extensive (ii) company; portfolio the of business to regard with (i) management provisions: from other covenants among include, likely will This company. portfolio the in shareholders as relations their govern to agreement PE houses and management will typically enter into a shareholders’ resignation, (voluntary constituting a“goodleaver”. circumstances specific termination for gross misconduct, etc.), with all other circumstances to by defined reference is leaver” “bad a whereby provisions leaver increasingly friendly an Ireland, in management more have to activity is funds PE by taken approach common PE in increase general the with parallel in increased has assets suitable for competition the As oes f n rs cmay r r cnrr t pbi plc. policy. public customary vetorightsareeffective. to contrary are that ensure to place in put or be can structures Generally,appropriate company Irish an of powers found to be void if they constitute an unlawful fetter on any statutory be may but courts, Irish by respected be generally will Vetorights budget control andacquisitionsdisposals. issues, equity/debt new around particular in and controls board control, the PE house is typically much more focused on veto In a minority PE investment, given the PE house is unlikely to have and shareholdervetorights. These veto rights will typically be split between director veto rights by management. taken be can decisions day-to-day that ensure to set commonly are thresholds although major matters, over financial and rights commercial veto corporate, significant enjoy normally investors PE . Whatarethetypicalgovernance arrangementsfor 3.1 Forwhatreasonsisamanagement equityholder 2.6 . Arethereanylimitationsontheeffectivenessofveto 3.3 Doprivateequityinvestorsand/ortheirdirector 3.2 GovernanceMatters 3 in yourjurisdiction? your jurisdiction? typically addressed? position, whatvetorightswouldtheytypicallyenjoy? arrangements requiredtobemadepubliclyavailable private equityportfoliocompanies? Are such usually treatedasagoodleaverorbadin the directornomineelevel?Ifso,howarethese arrangements: (i)attheshareholderlevel;and(ii) etc.)? Ifaprivateequityinvestortakesminority disposals, businessplans,relatedpartytransactions, corporate actions(suchasacquisitionsand nominees typicallyenjoyvetorightsovermajor www.iclg.com ireland 141 ireland 142 ireland © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London www.iclg.com Arethereanylegalrestrictionsorotherrequirements 3.6 the lawofchoicewilltypicallyberespectedbyIrishCourts. as law non-Irish set and which clauses law temporal Governing geographical, scope. sectoral of terms in reasonable extent the to enforced be only will restrictions Non-complete considered. be to other from need will jurisdictions those of laws companies the of impact the jurisdictions, includes structure group the if However, enforceability. regards as company Irish an to respect with apply to contrary public policy, are there are no such or limitations or restrictions that would statute contravene they that extent the to Save Arethereanylimitationsorrestrictionsonthe 3.5 the of eligibility the establish to shareholders tobringsuchanactionundercompanylaw. difficult be may it although resort), last a as (often directors nominee the against company the Shareholders may be established entitled to bring derivative actions on behalf of is agent) and between thenomineedirectorsandshareholders. principal special specific example, a (for if (ii) relationship or insolvency; on verging is or company portfolio insolvent the (i) if: owed be also may duties Certain information disclosure). regarding example, (for shareholders to duties owe circumstances, company,may,the limited but to in duties owe generally nominees see (but shareholders minority question 3.6 below the for potential liability as shadow director). to Board law duties company other or Irish fiduciary under to subject not is itself investor PE The Arethereanydutiesowed byaprivateequityinvestor 3.4 to retainshareholderlevelvetorights. wise is it company.Hence, portfolio the of interests best the in act Directors’ veto rights need to be balanced with the directors’ duty to companies. group target relevant the by taken) not (or taken are actions certain Such an agreement may also oblige the shareholders to procure that level. shareholder the at upheld be would arrangements veto agreed Ashareholders’ that ensure to into entered be to likely is agreement matheson 04 “A) i te oie drcos r acsoe t act to accustomed are directors nominee the if (“CA”), be 2014 may they circumstances certain in construed as “shadow directors” under s. 221 that of the Companies Act aware be to ought investors PE directors, nominate to entitled being of context the In by statuteorrestrictedfromsoactingunderIrishcompanylaw. disqualified not are they that particular, in including, directors, as act to eligible are directors nominee that ensure must investors PE typically addressed? portfolio companies? equity investorsthatnominatedirectorstoboardsof investors toportfoliocompanyboards,and(ii)private liabilities for(i)directorsnominatedbyprivateequity companies? Whatarethekeypotentialrisksand appointing itsnomineestoboardsofportfolio that aprivateequityinvestorshouldbeawareofin non-compete andnon-solicitprovisions)? (including (i)governinglawandjurisdiction,(ii) contents orenforceabilityofshareholderagreements shareholders (or to minorityshareholderssuchasmanagement vice versa )? Ifso,howarethese would reducethislist. portfolio company’s constitution in relation to any matter of concern A specific release passed in a general meeting or included within the directorial positions. other directors’ the (ii) or house, PE nominating the (i) to respect with example, for arise, may interest of conflict potential or actual director is released from his or her duty to the company…”. Such an any conflict “avoid between the directors’to duties director and…other interests unless a the on duty a imposes )) 228(i)(f (s. CA The not tothepartynominatingthemorothershareholders. nominee and are itself company the to owed generally they are duties their directors, although that mindful be must directors Such (iv) reducing limitationofliabilityperiods. and sellers; deals PE from protection in warranty and representation increase (ii) involving warranty structure; and indemnity insurance; (iii) continuing limited consideration the of “locked-box” prevalence continuing (i) include: trends Recent Ireland. in sellers PE to favourable generally remains M&Alandscape The the given can alsoimpactsignificantlyontiming. (particularly transactions) PE in statements mechanisms locked-box-pricing of prevalence financial suitable prepare to required time The 10.2. question further see – Ireland of Bank 12 months which have been subject to the last prior approval of the Central the regulated in companies in insurance) invested (including have services funds financial PE of number regulatory a instance, by For affected approvals. sector-specific largely other or competition is mainly approvals, transactions for timing The . Howdodirectorsnominatedby privateequity 3.7 . Havetherebeenanydiscernibletrendsintransaction 4.2 Whatarethemajorissuesimpactingtimetablefor 4.1 risks throughdirectors’ andofficers’ insurancepolicies. above the of impact the mitigate to seek typically will investors PE verging oninsolvency. or insolvent is company the if time of periods certain during made decisions certain for action clawback of risk the face may and CA) 223–228 ss. under duties their statutory their directors’(including duties breach they if liabilities incurring risk directors Nominated apply toit. a If fund. PE as treated be would investor PE the directors, shadow as construed the of instructions and directions the to according director of the portfolio company and directors’ duties would duties directors’ and company portfolio the of director Transaction Terms: General 4 of otherportfoliocompanies? terms overrecentyears? disclosure obligationsandfinancingissues? party nominatingthem,and(ii)positionsasdirectors interest arisingfrom(i)theirrelationshipwiththe investors dealwithactualandpotentialconflictsof and otherregulatoryapprovalrequirements, transactions inyourjurisdiction,includingantitrust

iclg to: privateequity 2019 ireland Special arrangements with any category of target ■ a announced, is offer an make to intention firm’s a Once ■ A transaction must be independently cash-confirmed before a ■ Takeover Rulesfeaturesofnote: such than a typical private company transaction, there are three that particular framework means restrictive more a Rules to subject Takeovergenerally are transactions the of application the While are Rules Takeover The supervisory jurisdictionoversuchtransactions. has disclosure. which “Panel”), (the TakeoverPanel Irish the by public administered and fees break capped timetable, deal obligations, announcement confidentiality, exchanges, and contain detailed provisions covering matters such as The stock certain on listed companies Irish affecting, transactions other certain and of, apply. takeovers of usually conduct the regulate will Rules Takeover Rules”) (“Takeover Rules Takeover In public-to-private transactions involving Irish companies, the Irish Whatparticularfeaturesand/orchallengesapplyto 5.1 matheson © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London iclg to: privateequity 2019 as sellers PE by preferred generally are structures “Locked-box” Whatconsiderationstructuresare typicallypreferred 6.1 Whatdealprotectionsareavailabletoprivateequity 5.2 h tre cn lo ge nt o hp h cmay r t assets, its or company the shop subject toconsiderationofthefiduciarydutiesdirectors. to not agree also can target The not would (ii) or typically beanacceptabletriggerforpaymentofabreak-fee. (i) of absence the in level acceptance minimum a achieve to failure mere The offer. competing a of success the (ii) or lapsing; or withdrawn being offer the in resulting board target the break-fee to consent by recommendation offer an of withdrawal the (i) including: events, only typically will arrangements Panel of up to 1% of the value of an offer, with The limited trigger consent. Panel with acquisitions public to relation in allowed are fees Break Transaction Terms: Private Acquisitions 6 Transaction Terms: Public Acquisitions 5 Panel. of duediligenceforthePEinvestor. to lapse or withdraw the offer. This increases the importance any condition other any invoke to scope limited have will bidder or the condition made, is offer acceptance an once condition, competition/anti-trust the for offer. save the with Furthermore, proceed to bound be generally will bidder the to available unconditionally bidder (includingpossiblybeingplacedinescrow). be to need will funding PE investor, this means that, at the time of announcement, its offer.an make to intention firm a announce can bidder a For transactions (andtheirfinancing)andhowarethese private equityinvestorsinvolvedinpublic-to-private commonly dealtwith? on thebuy-side,inyourjurisdiction? by privateequityinvestors(i)on thesell-side,and(ii) acquisitions? investors inyourjurisdictionrelationtopublic generally require Panel consent. Such consent may be given be may consent Such consent. Panel require generally of such arrangements or proposals an proposals or arrangements such general of a at approval meeting. This shareholder necessitates the importance of early formulation independent to subject nldn mngmn incentivisation management including d engagement with the with engagement d rpsl, will proposals, shareholder,

warranty andindemnityinsuranceprotection. for basis the form may package warranty full negotiated process, the elicit although diligence due to the generally during target is the regarding warranties disclosure the for rationale key The deed. warranty management separate a under warranties, business percentage their ownership and on to the basis they are usually (subject better placed to) provide often will management target’s The own shares,capacityandauthority. its to title regarding warranties provides only usually seller PE A arnis ie b mngmn, u sbet o limitations to subject but management, designed toensurethatpersonalliability ofmanagementislimited. business of by set a given of basis warranties the on given be typically will These negotiation ofthesaleandpurchase documentation. are during agree to insurer insurance sell-side and initial buyer for the documentation, buy-side of transaction part as for sellers PE by terms included commonly preliminary and obtained increasingly are policies insurance indemnity and warranty Buyer . Whatisthetypicalpackageofwarranties/indemnities 6.2 . To whatextentisrepresentation&warrantyinsurance 6.4 Whatisthetypicalscopeofothercovenants, 6.3 the pricinghas,intheory, beenbased). up prior to execution of the share purchase agreement (and on which drawn sheets/accounts, balance reference from deviations on based price purchase the to made are adjustments and completion after shortly up drawn accounts of set involve or statement a on rely may structures These debt. net used and capital working to commonly reference by adjustments structures consideration Other adjustment)). any of basis the form to not so (and “permitted” as treated be to is the following group target “locked-box date” (save to the extent the parties agree such leakage the from value of “leakage” any for compensated be will buyer The completion. after investors/sellers to proceeds sale of distribution prompt and savings cost liability, contractual reduced potentially information, financial over control greater outset, the from price purchase the in certainty offer they eadn te odc o te agt uies pre-completion business at achieving target such outcome rather than an absolute procure covenant). the of (although frequently limited to exercise of voting in a manner aimed conduct the and regarding structure) pricing undertakings cases, some locked-box in and, filings regulatory a with assistance (in no-leakage in to undertakings relation pre-completion provide usually will seller PE A regarding theconductoftarget businesspre-completion. Management will also generally provide pre-completion undertakings will beacceptabletoaPEseller. the target business. Typically non-solicitation of employees covenants exiting are who management of members by provided be may these but covenants, non-compete provide to unlikely very is seller PE A team toabuyer? the typicalcostofsuchinsurance? equity selleranditsmanagementteamtoabuyer? offered byaprivateequityselleranditsmanagement exclusions fromsuchinsurancepolicies,andwhatis excesses /policylimits,and(ii)carve-outs used inyourjurisdiction?Ifso,whatarethetypical(i) undertakings andindemnitiesprovidedbyaprivate

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143 ireland 144 ireland © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London www.iclg.com becomes unconditionalandthePE fundfailstoBidco. enforce this commitment directly against the PE fund to the purchase extent it share the generally can seller in The available. being financing conditions and agreement the of satisfaction the to only subject transaction, the to committed capital equity the with Bidco The PE fund usually gives a direct commitment to the seller to fund Howdoprivateequitybuyerstypicallyprovide 6.7 with theincreasinglyflexible W&I insurance market. line in evolving is trend is this again, but warranties management for This accounts escrow have to look regularly will buyers arrangements. PE increases. such resist to particularly true as the prevalence of W&I insurance on transactions look typically sellers PE but transactions some in feature do accounts retention Escrow Do(i)privateequitysellersprovidesecurity(e.g. 6.6 brought, and be may claims which within limits time include limitations General of theinsurancedeductible/excess. level the at set be often will warranties for liability management on In a transaction including warranty and indemnity insurance, the cap warranty claims. any for liability maximum capping (ii) and awareness; proportionate share of liability for any claim its and/or its own breach) and subject to for liable only is manager (each severally them Managers can limit their liability under the warranties by: (i) giving a relativelysmallamountwhichiscommonlyescrowed. to limited be likely will covenant “no-leakage” any under Liability or price purchase aggregate the uncapped. to equal cap a to usually subject are either warranties seller’s PE a authority, and capacity title, On the basis that a PE seller’s warranties will generally be limited to Whatlimitationswilltypicallyapply totheliabilityofa 6.5 be to tend premiums amounts, broadly between1%and1.5%oftheinsuredlimit. premium minimum to Subject the policyholder. of non-disclosure deliberate and dishonesty fraud, contamination, enterprise the value ofthetarget. of 1% and 0.5% between be to tend limits Excess or gap. that sellers of all or and some bridge to limits asked be excess often can management to subject be usually will policy A matheson nld cvrg fr rmnl ie ad eate, pollutio penalties, and fines criminal for coverage include providers insurance by applied exclusions standard market Some warranties, covenants,indemnitiesandundertakings? under anequitycommitmentletter, damages,etc.)? funding, righttospecificperformanceofobligations by thebuyingentity(e.g.equityunderwriteofdebt sellers typicallyobtainintheabsenceofcompliance (ii) equityfinance?Whatrightsofenforcementdo comfort astotheavailabilityof(i)debtfinance,and the managementteam)? warranties /liabilities(includinganyobtainedfrom (ii) privateequitybuyersinsistonanysecurityfor escrow accounts)foranywarranties/liabilities,and private equitysellerandmanagementteamunder de minimis andbasketthresholds. n/ ■ Corporate governance: on the IPO, depending on the listing the on depending IPO, the on governance: Corporate ■ Contractual obligations relating to the IPO: the PE seller will ■ to able be not may sellers PE restrictions: Lock-ups/selling ■ Market risk: unlike certain other PE exit routes, PE sellers are ■ the including exit, following: IPO an considering sellers PE by considered be to need which issues key of number a are There listing. US or Typically, an Irish IPO will be part of a dual-listing with either a UK Reverse breakfeesareunusualinPEtransactionsIreland. the company’s performancedeclines. stock it retains, with no ability to sell if the market begins to turn or any of respect to in period lock-up the exposed of duration the be for risk market will seller PE the result, a As IPO. the following transaction to transaction, but is typically for a period of six months The duration of the lock-up provided by the PE seller will vary from . Whatparticularfeatures and/orchallengesshoulda 7.1 Arereversebreakfeesprevalent inprivateequity 6.8 . Whatcustomarylock-upswouldbeimposedon 7.2 Transaction Terms: IPOs 7 elr a hv ejyd otata rgt t board the IPO (pleaseseefurthertheresponsetoquestion7.3below). of to completion on constrained significantly rights be to likely contractual are these IPO, the to enjoyed prior matters other and representation have may seller PE the whilst particular Therefore, a framework. governance corporate adopt to required often are companies venue, connection withthetransaction. in incur may they losses any covering indemnity transaction of broad a banks underwriting the give to expected be also suite will a give limited extent, the company being floated and its business. It to expected matters relating to itself and the shares it owns and, to a more be of range a to as will banks the to warranties and representations seller PE The agreement underwriting the to party entered into with the investment banks underwriting the IPO. a be to required be the durationoflock-ups. on commentary further for 7.2 question to response the see Please investment. its realise fully would fund PE the which would be a delay between the time of the IPO and the time at there such, As IPO. the after immediately company the of in the business to prevent detrimental effects on the valuation which they would be unable to sell some, or all, of their stake the IPO. PE sellers may be subject to a lock-up period during dispose of their stake in the business completely at the time of be can it seen as a more reason, significant failure by the whatever investor community). for transaction the postpone to successful a secure and need a is there (equally,if outcome that however, try means this to timeline deal the in earlier campaign pre-marketing a commencing by risk this mitigate to look can Sellers process. IPO an through capital investor institutional access to looking when risk market to exposed exit? If so,whattermsaretypical? private equitysellersonanIPOexit? private equitysellerbeawareofinconsideringanIPO transactions tolimitprivateequitybuyers’ exposure? iclg to: privateequity 2019 ireland uh as n rgltos n h U, hc cn necessitate can only have which that limited USties). entities US, (or entities the non-US many in by compliance regulations and laws such of reach extraterritorial potential and nature expansive the of aware laws. Aside from local laws, borrowers and sponsors should also be sanctions and corruption anti-bribery, with compliance to regards in careful especially be to need participants market example, For and laws transactions. specific PE affecting industry regime regulatory broader the any as well as regulations, with, compliance ensure and Ireland generally. However, market participants should be aware of, affect the choice or structure of debt financing of PE transactions in There are no particular legal requirements or restrictions that would participants havealsobeenabletoturndirectlendingfunds. market some transactions, certain For products. loan lien second term loan B (“TLB”) facilities, mezzanine and unitranche loans and include These loans. and/or bank replace secured senior to traditional supplement participants market to offered being products debt other of array wide a in resulted has which funds, and lenders “alternative”) (or non-bank and lenders bank traditional competition between increasing been has there years, recent in However, large PEtransactionsinIreland. and mid-market both fund to most used finance debt of the source common remains financing loan leveraged bank-led Traditional and eithertheUSorUK. way of an IPO will look to an IPO by way of a dual-listing in Ireland by exit to looking Typically,seller PE IPO. a an than rather sale a Almost all Irish transactions in recent years have concluded through Doprivateequitysellersgenerallypursueadual-track 7.3 matheson © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London iclg to: privateequity 2019 gap inthemarket,whichnon-bank lenderstookadvantageof. liquidity a left books loan their reduce and deleverage to whole a lenders. as banks on pressure regulatory increased crisis, financial non-bank the After and lenders mezzanine banks, of mixture a to credit, however, has continued to shift away from traditional lenders for businesses engaged in commercial real estate. The source of this The availability of credit continued to increase in 2018, particularly Whatrecenttrendshavetherebeeninthedebt 8.3 Arethereanyrelevantlegalrequirementsor 8.2 Pleaseoutlinethemostcommonsourcesofdebt 8.1 Financing 8 and (ii)weremoredual-trackdealsultimatelyrealised private equitysellerscontinuingtorunthedual-track, exit process?Ifso,(i)howlateintheprocessare financing) ofprivateequitytransactions? bonds). through asaleorIPO? financing marketinyourjurisdiction? debt financing(oranyparticulartypeof restrictions impactingthenatureorstructureof for suchdebt(particularlythemarkethighyield current stateofthefinancemarketinyourjurisdiction your jurisdictionandprovideanoverviewofthe finance usedtofundprivateequitytransactionsin (“ICAV”). The ICAV is a corporate entity that is able to elect its elect to Vehicleable the is that entity Asset-management corporate by a ICAVis Collective The (“ICAV”). 2015 Irish most in the world’s bolstered of was introduction the offering funds of investment one Our as funds. investment establish recognised to which in jurisdictions advantageous widely is Ireland attractive an provide Irish can to holding structureforPEinvestors). (which applying funds regime investment tax beneficial domiciled a has Ireland Finally, location forPEinvestmentsoutsideIreland. company holding attractive an also is Ireland above, to alluded As or reduced be can interest of eliminated. payment the on Irish tax structured, Appropriately withholding group. the target against Irish offset the of be profits can deduction tax this met, certain are Provided shares conditions satisfied). of being acquisition conditions certain an to with (subject connection in company holding Irish an by paid interest for available be should deduction interest In terms of share acquisitions generally, appropriately structured, an higher. For certain real structured. estate holding companies, the is stamp duty rate investment can be the how on depending higher), market if (or value, paid consideration the on 1% of rate the a upon at arise acquisition, generally will cost duty stamp Irish the an how company, on depend incorporated can Irish an is target the this Where structured. is costs, investment tax transaction of terms In general thincapitalisationrules. no and rules (“CFC”) company foreign controlled no has Ireland persons by resident intaxtreatycountries). controlled companies to payments, dividend of case the in additionally, (and countries treaty tax on in resident persons to taxes withholding Irish from dividends, interest and royalties, including exemptions exemptions for payments broad are There period ofatleast12monthswithintheprevious24months. continuous a for held been have must shareholding 5% minimum the EU or in a country with which Ireland has a tax treaty; and (b) a Irish in resident be must subsidiaries the (a) Twoapply: conditions main relieves exemption holding companies from Irish CGT on the disposals of subsidiaries. the shareholders” and “substantial rate Ireland’s tax corporation low availability ofIrishcreditreliefforforeigntaxes. Ireland’s a to of due is This combination tax). Irish of rate effective low very a with (or free and from foreign holding subsidiaries on an effective Irish tax-free Irish basis tax- subsidiaries Irish their companies. from dividends receive can holding companies for regime tax attractive an In terms of Ireland as a holding company jurisdiction, Ireland offers tax costs ontheflowsofcashfromportfoliocompanies. of management the and considerations, financing debt costs, PE for investors considerations will include the tax choice of holding structure, key transaction tax target, Irish an in investing When . Whatarethekeytaxconsiderations forprivateequity 9.1 will market from theEU. loan Irish loan the market in Ireland will be affected by the planned exit of the UK on the how exactly predict to impossible effectis It Brexit. be undoubtedly significant most The Tax Matters 9 off-shore structurescommon? investors andtransactionsinyourjurisdiction? Are www.iclg.com ireland 145 ireland 146 ireland © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London www.iclg.com Irish target companies. of context the in relevant be also may relief roll-over duty Stamp the target. defer any potential CGT in respect of the disposal of their to holding in order in “share-for- preferable) (where available that be will ensure relief CGT to share” keen be also will teams Management social and security). charge social universal tax, the income not of (and rates investment marginal the on return the on rates CGT of avail to appropriate) (as order in such), as documented be (and employee an as capacity their in not and structure, acquisition or target the in will roll-over a of shareholder a as capacity their in acquired part investment an of consist as acquired shares any that ensure to be A key tax consideration for management teams based in Ireland will Whatarethekeytaxconsiderationsformanagement 9.3 activities”, andsatisfiescertainadditionalconditions. “innovation or development” and “research qualifying on carries a in and years investment six least at for an place in remains to company,which trading relate must rate reduced the from which profits a benefit of share applying The and interest. carried gains such to chargeable rate reduced to subject being as a company or partnership a by received interest carried certain treating by managing for operates regime The managers funds. capital venture capital certain in investments venture by received interest”) “carried as (known return the for regime tax specific a has Ireland certain conditionsaresatisfied. to option share qualifying a provided sector SME the in company qualifying a in shares acquire of exercise an social the on and arising charge for security social universal provides tax, income which from exemption (“KEEP”) Programme” Engagement for favourable very Employee “Key a introduced also has Ireland employees/directors. potentially, qualifying is, certain This to met). (subject being purposes conditions tax Irish for shares the of value taxable the of 60% to up of abatement material a be could employees there the rules), tax Irish that (under shares” “restricted shares as qualify the receive if However, below). comments with social the and to (subject obtained benefits any on applying generally security charge Ireland, social universal tax, in income of based rates marginal employees/directors for advantageous particularly not is incentivisation share of forms most of treatment In general, whilst share incentivisation is common in Ireland, the tax Whatarethekeytax-efficientarrangements thatare 9.2 first the in out set paragraph above. factors the the on time, depending to structure time of from choice used structures offshore see do we said, regime as set out above, Irish structures often feature. However, that it short, in depends. Given the common, attractive features of Ireland’s are holding company structures offshore whether regards As The place. in ICAV are hasgreatpotentialinthecontextofPEtransactions. declarations certain provided tax Irish of free investors non-Irish to paid be can returns in that and fund the tax within attributes, Irish of tax free accumulate Irish can attractive gains and of income that rules. particular variety tax a box” have the funds “check domiciled US the under classification matheson investment intoanewacquisitionstructure? teams thataresellingand/orrolling-overpartoftheir shares, deferred/vestingarrangements)? equity acquisitions(suchasgrowthshares,incentive typically consideredbymanagementteamsinprivate €50 million,respectively. mandatory trigger will Ireland notification in Ireland. The previous in thresholds were €3 million and turnover €60 of generate more) together (or and million more) (or million €10 generate each target and acquirer the where mergers only 2019, January 1 From financial and police intelligence unitswillhavewideraccess. the as such Authorities Competent public. the to available made be not will addresses residential and numbers to certain content only and it should be noted that personal identifier central register, the public may access it but access will be restricted at the central register. In terms of access to information filed on the a have filings first their make to will 2019 June 22 from Companies months five of period register. central a on filed be also must register of beneficial owners, from 22 June 2019 certain information been signed into law. In addition to the requirement to have its own EU the under also now has Directives, Laundering obligations Fifth Anti-Money and Fourth Ireland’s meet beneficial to central register a ownership establish formally to legislation entity. Secondary that in interest ownership or rights voting or shares the of 25% than more of ownership indirect a or direct through entity control This legal or own ultimately owners. who individuals beneficial the list of will register register own its maintain legal to other or entity corporate body Irish an on requirement a is There States Member EU in investors pursuant tothe AIFMD privateplacement regimes. to marketed are that funds PE any also and EU the within managed are that funds PE all to apply disclosure portfolio from assets companies (the so-called release new “asset-stripping” rules). These to obligations buyers fund PE of imposes ability the on regulation PE new to requirements in relation to portfolio companies and new restrictions relation the In regulation. transactions, additional EU to the in subject operate which becoming funds PE in resulted has AIFMD The . Havetherebeenanysignificant changesintax 9.4 the in reliefs tax context ofshareawardswillalsoberelevant. any and (“FED”), deduction earnings foreign the and (“SARP”), programme relief assignee special the as such incentives employee of avail to potential the basis, ongoing an On 01Havetherebeenanysignificantlegaland/or 10.1

eid f ie er, r uh hre pro a my ae been have may as period shorter such specified by Irish Revenue when providing or the opinion/confirmation. years, five of period validity maximum a to subject be to stated are which Revenue, Irish by issued opinions/confirmations of period validity the on guidance new issued have Revenue Irish addition, In 2017. January 1 from are Ireland in effect took This basis. quarterly a on transactions” border States Member “cross- certain of respect in 2015/2376, issued rulings tax exchange to required (EU) Directive Council Under consideration inthecontextofPEinvestments. (“ATAD”) rules over the Directive coming years Avoidancein Ireland Anti-Tax will require the ongoing of implementation ongoing The 0Legal andRegulatoryMatters 10 anticipated? anticipated? teams orprivateequitytransactionsandareany impacting privateequityinvestors,management (including inrelationtotaxrulingsorclearances) legislation orthepracticesoftaxauthorities private equityinvestorsortransactionsandareany regulatory developmentsoverrecentyearsimpacting iclg to: privateequity 2019 ireland

omnctos Ciae cin n Evrnet n Irish and Environment airlines aresubjecttoforeigncontrolrestrictions. and Action Climate Communications, for Minister the and Media CCPC the of approval to firm. subject are mergers that of management the a over exercise influence to possible significant it makes that or firm, the in, rights voting orpinbiey eilto picpe, atclry given particularly principles, potentially and conduct corporate of scrutiny regulatory increasing legislation corruption/bribery anti- with compliance with concerned increasingly are sellers PE buyer maysetnomaterialitythresholdonthosekeycontracts. PE a contracts, key of number small a with business a to in but sector sector from vary will thresholds Materiality period. to six-week transaction from vary to three a over will conducted be will Typically, diligence diligence transaction. due legal of level The a regulated firm that represents place. A “qualifying holding” is either a direct or indirect holding in take can acquisition the before pre-approval the obtaining and CBI a the notifying first acquire without firm regulated the cannot in holding qualifying investors PE proposed the (“CBI”), Ireland of Bank Central the by regulated business a transaction of purchase the to the relates if particular, In rules. special have sectors Some Areprivateequityinvestorsorparticulartransactions 10.2 matheson © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London iclg to: privateequity 2019 Hasanti-briberyoranti-corruption legislation 10.4 Howdetailedisthelegalduediligence(including 10.3 subject toenhancedregulatoryscrutinyinyour diligence, contractualprotection,etc.)? materiality, scopeetc.)? jurisdiction (e.g.onnationalsecuritygrounds)? approach toprivateequitytransactions(e.g. impacted privateequityinvestmentand/orinvestors’ prior toanyacquisitions(e.g.typicaltimeframes, compliance) conductedbyprivateequityinvestors 10% or more of the capital of, or the PE section 9above. for See ICAVstructure). the (e.g. investors venue PE non-Irish structuring for options tax attractive attractive are There economically industry. PE and investment an provides Ireland

offence beingcommitted. the avoid to diligence” due all exercised and steps reasonable “all to took company the available that demonstrating is offence defence this for corporates secretary, single The manager, director, subsidiary. or any agent by employee, benefit its for committed actions corrupt the for liable held be to body corporate a for allows which offence liability corporate new a introduces This 2018. in enacted was 2018 Offences)Act (Corruption Justice Criminal The by addressed is warranty protectionregardingcompliancewithsuchlaws. concern this Typically, non-compliance. resulting from damage reputational and penalties financial significant company is a limited liability company. If an unlimite liabilities of its subsidiary/investee company, provided the portfolio Arethereanycircumstancesinwhich:(i)aprivate 10.5 11Whatotherfactorscommonlygiverisetoconcerns 11.1 to impose liability on a shareholder for the underlying activities/ underlying the for shareholder a on liability impose to as so veil” corporate the “pierce not will court Irish Generally,an entity’s debts. the for liable be can shareholders/partners its used, is partnership 1OtherUsefulFacts 11 the liabilitiesofanotherportfoliocompany? considering aninvestmentinyourjurisdiction? and (ii)oneportfoliocompanymaybeheldliablefor breach ofapplicablelawsbytheportfoliocompanies); the underlyingportfoliocompanies(includingdueto equity investormaybeheldliablefortheliabilitiesof should suchinvestorsotherwisebeawareofin for privateequityinvestorsinyourjurisdictionor

www.iclg.com d company or ireland 147 ireland 148 ireland © Published andreproduced withkindpermission byGlobalLegal GroupLtd,London www.iclg.com matheson ra wrs ih let ars a ag o idsre, nldn, in including, industries, of particular, technology, range manufacturingandfoodbeverage. a across undertaking clients with companies works Brian Irish with works regularly transactions outsideofIreland. investment He strategic and providing advice. matters including commercial general issues, on business-related clients advises he transactional his practice, to addition In teams. management and sponsors including spectrum target companies, venture and growth investment capital providers, private equity full the across clients for acts Brian cross- largest the of some border transactionsinvolvingIrishtargetcompaniesinrecentyears. in on worked expertise has particular and has M&A Brian cross-border London, in firm law international large a in worked previously Having refinancings. and ventures joint reorganisations, fundraisings, equity equity, private M&A, company Group, private including M&A matters transactional Corporate of range a firm’s on clients the advising in partner a is McCloskey Brian ahsns i ofcs icuig 6 ates n tx rnias n oe 40 ea ad a poesoas Mteo srie te ea nes of needs legal the banks, six of services the world’s 10 largest Matheson asset managers, seven of the top 10 global technology brands and professionals. we largest have advised 50 world’sthe majority the tax of of the half Fortune 100. over include and clients Our Ireland. legal from and in business 470 doing institutions financial and over companies focused internationally and principals tax and partners 96 including offices, six across Matheson’s work people 700 than more Francisco, San and York,Alto Palo New London, Cork, in offices with and Ireland Dublin, in 1825 in Established R:www.matheson.com URL: [email protected] +35312322000 Email: Tel: Ireland Dublin 2 70 SirJohnRogerson’s Quay Matheson Brian McCloskey aain n rpeet hg-e-ot idvdas n owner- and individuals high-net-worth managed businesses. represents and taxation personal issues. on insolvency-related advises and also taxes, Aidan employment-related transactions, property planning, financial border tax elements of private equity transactions. He also advises on cross- of consequences tax doing business the in and from Ireland. and Aidan has a particular focus M&A, on the reorganisations, international aspects of corporate taxation including the structuring of domestic and Aidan Fahy is a partner in the firm’s Tax Department and advises on all iclg to: privateequity 2019 R:www.matheson.com URL: [email protected] +35312322000 Email: Tel: Ireland Dublin 2 70 SirJohnRogerson’s Quay Matheson Aidan Fahy ireland Current titles in the ICLG series include:

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