FRANCE Law and Practice Contributed by: Idris Hebbat, Camille Perrin, Franck Vacher and Nicolas Menard-Durand, C-Level Partners
4.2 Vendor Due Diligence Vendor due diligence has become increasingly preva - lent in 2025, particularly in competitive auction pro - cesses, demonstrating its growing acceptance as standard practice. In general, vendor due diligence reports are deemed to be reliable because they are elaborated by an inde - pendent third party and not by the seller itself. How - ever, arranging further buy-side due diligence in order to confirm the results presented in the sell-side due diligence report is always good practice and is quite customary. In France, most acquisitions by private equity funds are negotiated confidentially. If the negotiations between the seller and the buyer succeed, both par - ties may then enter into a share sale and purchase agreement (SPA), which is the most typical acquisition scheme in France. The terms of the SPA may vary slightly, depending on whether the target is sold by means of an auction process or through one-on-one negotiations. In the first case, one can expect the SPA to be more seller- friendly, since in a competitive process the seller has greater negotiation power. 5.2 Structure of the Buyer Private equity funds often invest through a special- purpose vehicle (SPV), which is an entity created for the purpose of carrying out a specific transaction. Most SPVs are incorporated as a simplified joint stock company ( société par actions simplifiée , or SAS). This corporate form is preferred by private equity investors for various reasons: 5. Structure of Transactions 5.1 Structure of the Acquisition • an SAS can be formed with a single shareholder and the capital requirements are very low (an SAS can be incorporated with an initial share capital of EUR1); • with no strict regulations, the SAS allows for great flexibility in terms of corporate governance, which
is particularly appealing for private equity investors; and • the shareholders’ liability is limited to the amount of their contributions. In general, the acquisition documentation is signed by the SPV (which is a subsidiary of the private equity fund), rather than by the private equity fund itself. 5.3 Funding Structure of Private Equity Transactions Private equity deals are financed either with cash, debt or a combination of both. The large majority of deals negotiated during the first half of 2022 were at least partly financed with debt. The structure of the debt can be particularly complex, although its purpose is almost always to finance the acquisition and refinance existing debt. In general, it may consist of: • senior debt, often granted for a term of five to seven years, comprising several tranches with distinct maturities; • junior debt, the repayment of which is subordinat - ed to the repayment of the senior debt; • mezzanine debt, often granted by specialised investment funds and structured in the form of securities giving access to the target’s capital; or • unitranche debt, which consists of a hybrid loan structure that combines senior debt and mezzanine debt into one loan (this type of debt is increasingly used and provided by debt funds instead of finan - cial institutions). To contractually ensure the existence of funds from a privately funded buyer, an equity commitment letter and a debt commitment letter are often used. Debt funding was tougher in 2024 compared to 2025 since interest rates have decreased. Private equity investors usually take both minority and majority positions. However, there has been a real increase in transactions in which investment funds take minority positions. These transactions are no longer the exclusive privilege of small companies, but also concern large medium-sized companies. Simi -
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