FRANCE Law and Practice Contributed by: Idris Hebbat, Camille Perrin, Franck Vacher and Nicolas Menard-Durand, C-Level Partners
to the fund have to remain information, reporting or veto rights on strategic issues. If the rights granted to the fund go further and grant it decision-making pow - er, the fund may be held liable as a de facto manager.
The so-called “tag-along clause” is also frequent - ly included in private equity transactions. It can be drafted in two different ways: • first, it can be a full tag-along right, allowing share - holders to transfer all of their shares to the pur - chaser for control of the company; or • second, it may be a proportional tag-along right, the purpose of which is to allow the beneficiaries to transfer, together with a transferring shareholder, a proportional share of their holding. This clause can typically be applied to institutional investors or to managers. 10.3 IPO The lock-up agreement is a period during which the shareholders of a company undertake to hold the company’s shares for a given period following an IPO. This period is usually quite short and rarely exceeds nine months, although some clauses make the lock- up last for a year. IPOs are typically subject to a lock- up arrangement of 180 calendar days. This commit - ment is often made to reassure investors. Shareholders’ agreements can also be concluded after the IPO, in particular, for the management or to give a priority right in the event of a share transfer.
10. Exits 10.1 Types of Exit
Most private equity funds expect to sell their invest - ment and therefore exit the target company four to seven years after the deal’s completion date, since the senior debt is granted for such a duration. In the French jurisdiction, the most common forms of private equity exit include secondary buyouts and trade sales. In some cases, the exit of the LBO can intervene by merging the holding company and the operating company before the launch of the IPO. In 2024 and early 2025, the volume of IPO has decreased. 10.2 Drag and Tag Rights The so-called “drag-along clause” is often used in pri - vate equity transactions. It is possibly even one of the most fundamental clauses. Sometimes, the drag right is in the hands of the sole majority shareholder. Some - times the threshold varies if there are several majority shareholders. It mainly depends on the negotiating power of each majority shareholder.
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