IRELAND Law and Practice Contributed by: Enda Garvey, Brian McCloskey and Robert Maloney Derham, Matheson LLP
Private equity sellers will typically only give funda - mental warranties in respect of title and capacity. Although the target’s management team may – to varying degrees – provide business and operational warranty cover, the cap on liability for such manage - ment warranties will typically be significantly lower than the overall purchase price. This has resulted in the widespread use of W&I insurance in private equity M&A deals. Financial caps on seller liability for breach of warranty claims of between 25% and 50% of the overall pur - chase price are common in mid-market and higher- value transactions, whereas historically market prac - tice in Ireland would have been for 100% of the overall purchase price to be “on risk” for breaches of war - ranty. Known issues are typically excluded, except in the case of fraud. Customary time limits on fundamental warranties and tax warranties can be up to five or six years, whereas for business warranties the time period is typically 12 to 24 months. Given that private equity sellers typi - cally insist on a W&I policy, there is no difference in the periods provided, save that W&I providers will often extend the time periods to six or seven years and three years respectively. 6.10 Other Protections in Acquisition Documentation W&I insurance has, over the years, become a popular means used by parties in private equity transactions to bridge the gap between the desired level of war - ranty coverage from a buyer perspective and the level of exposure a seller is willing to assume in respect of potential warranty claims on the sale of a company or business. Even though the level of cover will vary, the policy can be used to reduce the seller’s liability to as low as one euro for certain assets and, in particular, property assets – although the one euro cap is being applied more and more in other industries. However, the sell - er typically retains risk for the title and capacity war - ranties, and – if found to have acted fraudulently or engaged in wilful misconduct – will retain full liability.
W&I insurance is now common in respect of funda - mental and/or business warranties and also for tax warranties. In Ireland, a separate tax deed is typi - cally also used to allocate tax risk between a buyer and seller on a euro-for-euro indemnity basis. More recently, W&I providers have been willing to cover tax deeds in full under the W&I policy, subject to certain customary carve-outs. Owing to the prevalence of W&I insurance, and the insurer’s appetite to provide specified cover for certain indemnities, it is no longer common to have an escrow or retention in place to back the obligations of a pri - vate equity seller. We rarely see escrow or retention arrangements save for bespoke deal-specific risks in deals that carry a high value or probability of risk. 6.11 Commonly Litigated Provisions Litigation is relatively uncommon in private equity transactions in Ireland. This is partly attributable to the limited warranty liability provided by private equity sellers. Where disputes arise, they typically relate to the consideration mechanism and earn-outs. Public-to-private transactions by private equity- backed bidders are rare in the Irish market – there are seldom more than one or two a year (and often none). A recent example is Pandox’s acquisition of Ireland’s largest hotel group, Dalata, for EUR1.4 billion. The authors have noted an increase in the number of enquiries where clients were exploring opportunities in this space, particularly in light of the pressure on public market valuations. 7. Takeovers 7.1 Public-to-Private A public-to-private transaction is regulated by the provisions of the Irish Takeover Panel Act, 1997 (as amended), as well as the Irish Takeover Panel Act, 1997, the Irish Takeover Rules, 2022 and, where rel - evant, the European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006 (together, the “Takeover Rules”). The Takeover Rules regulate the conduct of takeovers of Irish companies listed on certain securities exchanges. The Irish Takeover Panel
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