FINLAND Law and Practice Contributed by: Christoffer Waselius, Jaakko Huhtala and Niko Markkanen, Waselius
6.2 Locked-Box Consideration Structures It is not very common for interest or reverse interest to be charged on a leakage that occurs during a locked- box period. 6.3 Dispute Resolution for Consideration Structures Locked-box consideration structures do not usu - ally have specific dispute resolution mechanisms. In deals with completion accounts, it is almost a rule that there is a specific dispute resolution mechanism under which a dispute with respect to the completion accounts may be referred by either party for determi - nation by an independent auditor. At the outset, either the locked-box or completion accounts consideration structure is also subject to a general dispute resolution provision under the share purchase or asset purchase agreement, which often refers to arbitration proceed - The level of conditionality in private equity transac - tions depends on the target characteristics and the industry in which the target is involved, among other matters. Save for regulatory conditions, such as rel - evant competition law approvals, approval under the Act on the Screening of Foreign Corporate Acquisi - tions or clearances under the EU Foreign Subsidies Regulation (Regulation (EU) 2022/2560), other com - pletion conditions have rarely been included during the last few years with high deal activity. However, completion conditions are still included in deals where the specifics of the case call for them, for instance, necessary third-party consents from key contractual counterparties or relevant finance providers of the tar - get due to change of control provisions. Material adverse change/effect provisions are uncom - mon in the Finnish market. 6.5 “Hell or High Water” Undertakings ings as agreed between the parties. 6.4 Conditionality in Acquisition Documentation In highly competitive deals, private-equity-backed buyers do occasionally accept “hell or high water” undertakings. While such undertakings are not the norm in Finnish transactions, they have been used or accepted more frequently during the last few years of heightened competition for attractive targets. No
common during the last few years; however, the use of completion accounts has increased lately due to the recent economic uncertainty. Usually, the seller prefers the locked-box structure to completion accounts, which tend to be more popular on the buyer side, especially in transactions that do not involve private equity investors. In a locked-box structure, the buyer usually requires that the seller covenants that the target operates its business in the ordinary course and that there is no leakage, ie, that the target does not pay any dividends or make other distributions to the seller between the locked-box date and closing (such distribution being known as “leakage”). Earn-Out Structures Earn-out structures have recently been used to some extent, and they occur in particular in smaller transac - tions to bridge a potential gap in the valuations of the seller and the buyer. However, typical issues in the use of earn-out structures are the challenges relating to the operation of the target during the earn-out period and the fact that it may be difficult for the parties to reach consensus with respect to the earn-out calcula - tion mechanisms. Deferred or Additional Purchase Price Mechanisms Deferred or additional purchase price mechanisms are also sometimes used and are often conditioned to the occurrence of a future event agreed between the parties. Roll-Over Structures Roll-over structures are seen from time to time, albeit rarely, since there is no specific roll-over tax relief in Finland. Therefore, any reinvestment by management would be made with after-tax proceeds. Compensation For the purpose of compensating the seller for the tar - get’s anticipated cash flow during the period between the locked-box date and completion, it is common for the locked-box price to be subject to an interest mechanism, which is typically calculated from the rel - evant locked-box date until completion.
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