JERSEY Law and Practice Contributed by: Paul Burton and David Allen, Maples Group
arise as part of financing or the writing of a buyer’s W&I policy.
• they should not be subject to onshore tax/stamp duty on future disposal. In addition, the use of Jersey management incentive planning (MIP) vehicles for manager incentivisation aligns target management objectives with those of the private equity sponsor. Recent years have seen a significant increase in the use of MIP vehicles for the many incentivisation- restructuring rounds that have occurred where port - folio company assets are in the buy-and-build phase. 5.3 Funding Structure of Private Equity Transactions Generally, private equity transactions are financed via a mix of equity contributions sourced from invest - ing private equity funds and external debt/leverage provided by syndicate banks, institutional financiers and a range of alternate credit providers. For larger transactions, accessing funding from the debt capital markets (ie, bridge to bond) is attractive from a cost- of-funds perspective. Unitranche financing, which involves a hybrid loan structure combining senior and subordinated debt into one loan facility at a blended interest rate, has also proved attractive to private equity sponsors. Interest rate movement and the high margin cost of vanilla leveraged financing options has led the most active sponsors to seek out alternative and mezza - nine-style credit solutions. This has impacted credit committee consideration of new money transactions, resulting in more protracted come-to-market periods. For alternate credit funding of private equity acquisi - tion transactions, it is relatively common for private debt funds to have agreed to provide committed capital at signing. The efficiency associated with not having to syndicate or take out bilateral debt post- completion has driven this particular behaviour. Both fund-level and leverage financing options fea - ture significantly in downstream private equity trans - actions involving Jersey vehicles. Market conditions have enhanced the attractiveness for private equity sponsors of participating in leverage financing solu - tions as alternate credit providers.
5. Structure of Transactions 5.1 Structure of the Acquisition
Most private equity acquisitions in Jersey are struc - tured as private treaty sales with purchase agreements negotiated between the parties. However, there has been an increase in the use of the Jersey statutory merger procedure to effect both private and public acquisitions in recent years. Competitive auction pro - cesses are common in the infrastructure space, where prime assets are coveted. Larger transactions involving a Jersey target company or listed targets may proceed by way of a court-sanc - tioned scheme of arrangement, or a takeover process governed by the Takeover Code. The Takeover Code, and the appointment of the Takeover Panel to admin - ister provisions thereof, have been adopted in Jer - sey through the enactment of domestic legislation. Other acquisition types include statutory mergers and business asset transfers, although these are less fre - quently encountered. 5.2 Structure of the Buyer Straight-line Jersey private company acquisition structures are preferred by private equity sponsors and co-investors. Tiered Jersey debt and equity acquisition structures involving a topco (top holding company), midco (inter - mediate financing vehicle) and bidco (bid vehicle) are typical. Such structures have the following attributes: • they enable structural subordination of intra-group/ external financing; • they facilitate the requirements of both private equity sponsor and target management; • they provide UK-resident-non-UK-domiciled target management with remittance-based taxation options for future exit (eg, capital gains taxation); • they allow for simplified dividend flows to private equity fund investment vehicles and ultimately limited partnership (LP) investors; and
331 CHAMBERS.COM
Powered by FlippingBook