IRELAND Law and Practice Contributed by: Enda Garvey, Brian McCloskey and Robert Maloney Derham, Matheson LLP
5.2 Structure of the Buyer Private equity transactions are typically structured in Ireland using either a double or triple “stack”. This usually consists of: • a top holding company (“HoldCo”) through which the private equity fund will hold its equity; • an intermediate holding company (which, depend - ing on the overall funding structure for the deal, will typically be used to hold the private equity fund’s shareholder debt); and • the purchaser vehicle (“BidCo”), which will be the vehicle used to acquire the shares in the target company. The primary role of the BidCo is to acquire and hold the target’s shares; however, it may also act as a bor - rower under debt facilities. For tax purposes, it is common to have multiple holding companies inserted between the HoldCo and the BidCo. For inbound investments, the BidCo is typically a private limited company resident for tax purposes in Ireland. The jurisdiction of incorporation of the BidCo can vary and may be offshore or onshore. The structure of a private equity investor will typically differ where the investor is acquiring a minority posi - tion in the target company. Such investments will typi - cally be structured directly through an existing entity rather than through a BidCo. In outright buyouts, it is very uncommon in Ireland for the private equity inves - tor itself (or one of its funds) to act as the BidCo, for the above-mentioned reasons. 5.3 Funding Structure of Private Equity Transactions In an Irish context, an equity commitment letter is typically provided ahead of funds being drawn down. In the context of third-party debt financing, it is less common for the lender (whether that be a traditional bank or a private credit lender) to provide a letter of commitment (or equivalent). This has not changed noticeably in the past 12 months – although, where such third-party debt finance is being utilised, there has been a more recent trend towards lenders under - taking a greater level of due diligence and requiring tighter financial covenants.
vendor’s advisers will typically provide reliance on the VDD report.
5. Structure of Transactions 5.1 Structure of the Acquisition
The vast majority of transactions are structured as share sales. However, there has been an increase in the number of asset sales in the form of business carve-outs where certain large corporates seek to focus on their core business lines and dispose of non-core assets. Asset purchases and business trans - fers can be more appropriate where a specific part of the target’s business is being acquired and there - fore needs to be carved out from the larger business, which may be appropriate in certain sectors. While there has been a recent trend towards bilateral transactions, auction sales remain common, particu - larly where private equity investors seek to exit their investment. No specific regulatory restrictions apply, and the structuring of the terms will largely be busi - ness-specific and/or timing-specific. It is essential that a robust non-disclosure agreement is entered into before commercially sensitive infor - mation is shared with potential bidders. Generally, a non-disclosure agreement is entered into with poten - tial bidders before the information memorandum is shared. Even though in the majority of cases the highest bid - der is successful in an auction process, there is no requirement for the seller to accept the highest bid. Where mark-ups of the primary transaction docu - ments are required as part of the bid process, the form of the mark-up can influence the determination of the successful bidder. Although privately negoti - ated transactions and auction sales will typically be conducted on similar terms, in an auction sale there is typically less scope for negotiation by the bidders, and sellers will look to maintain competitive tension for the duration of the process.
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