SWEDEN Law and Practice Contributed by: Louise Rodebjer, Ólafur Steindórsson, Per Dalemo and Johannes Wårdman, CMS Wistrand
rules included in the self-regulatory structure apply to shares listed on, for example, an MTF platform. 6.3 Consideration Private M&A Transactions In private M&A transactions in Sweden, cash is the primary form of consideration. To bridge valuation gaps, earn-outs are commonly used, where part of the purchase price is contingent on the target company achieving specific financial or operational milestones after closing. In transactions where one or more sellers are involved in the day-to-day operations of the target company, reinvestment – which effectively means payment in shares – is relatively common in private equity buy- and-build deals. This approach allows the sellers to retain an ownership stake in the business, creating shared incentives with the buyer and encouraging continued involvement in the business. In one recent case, the authors observed that where there was a value gap the listed buyer offered war - rants in the buyer in addition to cash, in order to reach a bid level acceptable to the sellers, even though the use of earn-outs as previously described is more com - monly seen. A value gap could also be closed by the buyer withholding a part of the consideration by issu - ing a promissory note rather than paying upfront in cash, resulting in a deferred payment. Public M&A Transactions In a public takeover situation, cash is also the pri - mary form of consideration. An offeror may offer cash, shares or a combination of both. However, in a man - datory offer, the offer must include a cash alternative, ensuring that all shareholders have the right to receive cash payment. Shareholders have the option to reject the offer if they consider it insufficient, in which case the bidder would be required to raise the offer to meet a price level that is acceptable to the seller collective. 6.4 Common Conditions for a Takeover Offer According to Swedish takeover rules, mandatory offers must be unconditional. However, it is permitted to include a condition that the company must obtain the necessary regulatory authorisations. A takeover procedure is therefore typically structured in such a
way that the offeror first makes a voluntary offer before the mandatory bid rules come into force, allowing the offeror to set the terms of the offer. Common condi - tions include: • that the offer will be accepted provided that the offeror acquires shares representing more than 90% of the total issued shares of the target com - pany; • that the offeror shall obtain all necessary approv - als, authorisations, decisions and other necessary actions from the relevant governmental authori - ties or similar bodies on terms acceptable to the offeror; • that the target company shall refrain from taking any action that may adversely affect the terms and conditions of the offer; and • the right to waive one or more conditions, thereby rendering the offer unconditional. Regulatory uncertainty has also contributed to increased use of robust regulatory protection clauses in transaction agreements – in particular, so-called “hell or high water” clauses, under which buyers commit to taking extensive steps to secure regula - tory clearance. 6.5 Minimum Acceptance Conditions In Sweden, the typical minimum acceptance thresh - old for a takeover bid is over 90% of the shares and voting rights. If this threshold is reached, the offeror may initiate a squeeze-out procedure under the Swed - ish Companies Act, whereby the remaining minority shareholders’ shares are compulsorily acquired. Addi - tionally, minority shareholders can also demand a squeeze-out if a majority shareholder holds over 90% of shares. According to the Swedish Companies Act, minority shareholders must receive cash compensa - tion for their shares in a squeeze-out process. Another key control threshold is ownership of more than 50%, which allows a shareholder to take deci - sions by simple majority, thus effectively controlling the company by (for example) being able to solely appoint the board. With this level of control, the share - holder can effectively direct the company’s manage - ment and strategic direction. It should be noted that a company’s articles of association may stipulate
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