FRANCE Law and Practice Contributed by: Idris Hebbat, Camille Perrin, Franck Vacher and Nicolas Menard-Durand, C-Level Partners
• obtainment of regulatory approvals (in particular, foreign investment and antitrust approvals); • obtainment of funding (if any); • obtainment of third-party consents (if key contracts containing change-of-control provisions were iden - tified during the due diligence process); and • the absence of any material adverse change (MAC) between signing and closing (if the share purchase agreement contains a MAC clause). If the use of MAC clauses was important during and after the COVID-19 pandemic, they are however not a predominant feature in French private equity deals and their use has declined in the past years except in smaller transactions not intermediated by a invest - ment banker. “Hamon” Law In addition, the so-called “Hamon” law has imposed several other conditions that must be met before the takeover of any company employing employees can be carried out. Indeed, the company’s employees have to be informed before the transaction is carried out so that they are able to make an offer to the seller prior to the third party making an offer. Similarly, the target’s working council has to be consulted suffi - ciently in advance of the transaction. In so far as this information and consultation must be carried out before the sale takes place, it is not strictly speaking a condition precedent. The most commonly used formula is the signing of a put option, allowing the seller to exercise the option once the information/ consultation obligations have been fulfilled. 6.5 “Hell or High Water” Undertakings This type of clause concerns, in principle, transactions of considerable size. The acceptance by the purchas - er of such a clause clearly depends on the negotiating power of each party, but especially on the applicable regulatory provision concerned. When the regulatory provision relates to competition law, and particularly to antitrust provisions, this clause is difficult to accept for the purchaser. Agreeing to it is dangerous as the remedies can be harsh and costly.
On the other hand, in the case of a provision pursuant to foreign investments in France, the negotiation of this type of clause seems to be easier. Indeed, prohibi - tions are very rare and remedies are easier to imple - ment in this context. “Hell or high water” clauses are therefore less difficult to take on in this context. In any case, this is a matter of bargaining power and the specific situation of the purchaser. If it is a private equity firm with no competing companies in the port - folio nor in the context of a build-up, a “hell or high water” clause is more likely to be accepted. 6.6 Break Fees Although not specifically prohibited by French law, break fees in favour of the buyer or the seller are not commonly used in France. If stipulated, break fees will become due if either party decides to terminate a pending deal for a reason not attributable to the other party. That being said, it is important to bear in mind that there are no punitive or exemplary damages under French law. Therefore, if the amount of the break fees exceeds the value of the damage actually suffered by the claimant party, the amount of such termination fees can be reduced by a court decision. 6.7 Termination Rights in Acquisition Documentation Acquisition agreements in France usually contain a right to terminate the transaction if the conditions precedent are not fulfilled or are waived before the contractually agreed long-stop date. Moreover, if a MAC clause is set forth in the acquisition agreement, the buyer is entitled to cancel the deal if the target’s business and operations suffer a material adverse change during the interim period (ie, between sign - ing and closing). The duration of the long-stop date depends on the nature and number of conditions precedent involved but is usually between three and six months. 6.8 Allocation of Risk The allocation of risk generally depends on the nego - tiation leverage of the parties involved in the transac - tion and therefore may vary from deal to deal. From a legal standpoint, the risk related to the acquired target
189 CHAMBERS.COM
Powered by FlippingBook