GERMANY Law and Practice Contributed by: Georg Linde and Kamyar Abrar, Willkie Farr & Gallagher LLP
10.3 IPO IPOs remain an infrequent but strategic exit route in Germany. Transactions typically involve a lock-up period of six to twelve months to stabilise trading post-listing. Although formal relationship agreements are rare, pri - vate equity sponsors frequently retain board seats and veto rights post-IPO, particularly where they remain significant minority shareholders. To build market credibility and demand, cornerstone or anchor inves - tors are often secured pre-IPO. Offer structures usu - ally include a mix of primary shares (company capital raise) and secondary shares (sponsor sell-down). Successful IPOs require precise timing and alignment with broader capital markets. In the current environ - ment, IPO activity remains subdued, but private equity sponsors continue to prepare companies for listings as part of a dual- or triple-track strategy where appro - priate.
Tag-along rights, on the other hand, are designed to protect minority shareholders by allowing them to participate in a sale under the same terms as the majority seller. These rights usually apply to any sale by the majority, including partial disposals, and may be structured pro rata , depending on the shareholder agreement and equity structure. Institutional co-investors, who often hold significant stakes and possess greater negotiating leverage, fre - quently secure customised terms, such as modified thresholds or enhanced protections, to better reflect their investment strategies and risk preferences. Despite a general consensus on these rights, they are seldom activated in practice. Typically, private equity sponsors work closely with other shareholders prior to a planned exit to ensure alignment and prevent the formal exercise of such rights.
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