JERSEY Law and Practice Contributed by: Paul Burton and David Allen, Maples Group
ing and other kinds of third-party consents is less frequent. Takeover Code-governed offers must include a con - dition that the offer will lapse if the bidder does not acquire (or contract to acquire) more than 50% of the voting share capital of the target. In Jersey, acquir - ing or contracting to acquire 90% of the target share capital to which the offer relates enables the bidder to engage in the compulsory acquisition procedure available under Jersey company law. Material adverse change/effect (MAC) provisions are common and have been a focus during the COVID-19 pandemic. The acceptance of generic MAC provisions in the current climate is unlikely, but a MAC provi - sion that addresses a specific risk or issue may be acceptable. 6.5 “Hell or High Water” Undertakings It is not common for a private equity-backed buyer to agree to “hell or high water” provisions in transac - tions that are subject to regulatory approvals (includ - ing competition and antitrust). Agreements to absolute obligations of this kind, which may result in divesti - tures or require certain outcomes in the context of pending litigation, are more common in a public M&A context. 6.6 Break Fees Deal-protection measures like break fees have not featured in Jersey transactions involving private equi - ty-backed buyers. In larger cross-border transactions with a Jersey element, break fees were more common prior to their abolition as a result of changes to the Takeover Code in September 2011. Reverse break fees are not customary in Jersey transactions involving private equity-backed buyers. However, as they are not prohibited by the Takeover Code, they are permissible subject to Jersey law rules on excessive penalties, which are, broadly speaking, similar to those that apply under English common law. 6.7 Termination Rights in Acquisition Documentation Deal execution and completion risk remains high on the agenda for private equity transaction participants,
so parties (and private equity-backed buyers in par - ticular) will typically only permit the termination of an acquisition agreement in Jersey in very specific (and narrow) circumstances. Termination rights are, in gen - eral, limited to mandatory conditions (outside of the control of each party) that are not satisfied by a certain long-stop or “sunset” date. A typical long-stop period may run to, for example, six months. Otherwise, MAC provisions, as discussed in 6.4 Con- ditionality in Acquisition Documentation , potentially allow a party to terminate or adjust its obligations in the event of a change in circumstances that sig - nificantly affects the value of the target. Automatic termination triggered by a contractual provision in an acquisition agreement is rare. 6.8 Allocation of Risk In Jersey, market practice is a more powerful driver of the allocation of risk between parties to a private equity acquisition transaction than the type or nature of the parties involved. For example, numerous trust company and corporate services businesses in Jer - sey have been the subject of primary private equity investment, as well as secondary and tertiary man - agement buyouts (MBOs) and management buy-ins. In the majority of these deals, it is common for risk to be shared between the parties, although on balance, private equity sellers prioritise minimising their expo - sure to liability during the sale of a portfolio company. The impact of this is that the extent to which private equity sellers assume ongoing liability in a divestment is very limited. On buyer-insured transactions, nomi - nally capping seller liability will result in only theoreti - cal risk for private equity sellers. The main ways a private equity seller will look to limit liability include negotiating: • caps on financial exposure; • time periods by which claims can be made (eg, 12 to 24 months); • de minimis claim levels (individual and aggregate); • regulating the conduct of a dispute regarding a breach of warranty or any third-party claims; and • obligations on buyers to mitigate any loss suffered.
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