DENMARK Law and Practice Contributed by: Dan Moalem, Jakob Skafte-Pedersen, Poul Guo and Thomas Enevoldsen, Moalem Weitemeyer
W&I Insurance as an Enabler The widespread use of W&I insurance in Danish PE deals also affects funding structure, as insurance pro - ceeds are often factored into coverage and security packages from both equity and debt providers. 5.4 Multiple Investors Consortia and Club Deals Remain Limited but Possible Transactions involving a consortium of private equity sponsors are mostly seen in large transactions and cross-border transactions where deal size or sec - tor expertise calls for shared exposure. The Danish market is dominated by mid-market activity, where single-sponsor transactions are more common due to efficiency and governance simplicity. Co-Investments Alongside the Lead Fund Co-investments by limited partners (LPs) alongside the lead fund or general partner (GP) are relatively com - mon in Denmark. These co-investors typically take passive, minority stakes and do not engage directly in governance or decision-making. Co-investment struc - tures are often pre-negotiated and allow for increased ticket size flexibility for the fund without concentration issues. Corporate–Private Equity Partnerships Consortia comprising a private equity fund and a strategic corporate investor are not very common in Denmark. When such structures arise, they are typi - cally used in transactions where the corporate brings sector-specific know-how or clear industrial logic, while the private equity sponsor contributes capital structuring and transactional expertise. 6. Terms of Acquisition Documentation 6.1 Types of Consideration Mechanism Locked-Box Structures Dominate in Sponsor-to- Sponsor Deals The predominant pricing mechanism in Danish pri - vate equity transactions is the fixed-price model with a locked-box structure. This approach is particularly common in sponsor-to-sponsor transactions and competitive auction processes. It provides pricing certainty and limits the need for post-closing adjust -
ments for management and layered investor instru - ments for the fund and co-investors. Involvement of the Fund The private equity fund itself usually does not become a direct party to the acquisition or sale documentation. Instead, the fund is typically represented indirectly through its ownership of BidCo and through control mechanisms in shareholders’ agreements or govern - ance documents. However, in larger or more competitive transactions, it is not uncommon for the fund or its manager (GP) to provide equity commitment letters or support letters to sellers or lenders, offering additional contractual certainty. 5.3 Funding Structure of Private Equity Transactions Combination of Equity and Acquisition Financing Private equity transactions in Denmark are typically financed through a combination of equity contribu - tions from the sponsor and acquisition debt provided by third-party lenders and potentially re-investment by the seller and/or management of the target. Equity Commitment Letters To provide contractual certainty to sellers, particularly in competitive processes, it is a seller requirement that private equity sponsors issue equity commitment let - ters upon submission of binding offers. These letters confirm that the fund has committed to fund the BidCo with the necessary equity to complete the transaction, subject to agreed conditions. Debt Financing and Comfort Mechanisms The starting point in a competitive process is ascer - taining funds which, in addition to the equity com - mitment letter, requires a debt commitment letter for the debt-financed component of the acquisition. In less competitive processes, the lower level of debt- financing comfort will typically be accepted, such as: • debt commitment letters from lenders (subject to standard conditions); • detailed funding plans in the SPA; and • “soft” comfort in the form of bank engagement let - ters or term sheets.
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