NETHERLANDS Law and Practice Contributed by: Maarten de Boorder, Rutger Sterk, Bas Vletter and Samuel Garcia Nelen, Greenberg Traurig, LLP
10.2 Drag and Tag Rights PE investors will negotiate drag-along rights in order to gain a high degree of control over a future sale of the portfolio company. Typically, this drag-along right is matched by a tag-along right negotiated by co-investors and management. Drag-along rights enable selling majority shareholders to force minority shareholders to participate in a sale and offer their shares, whereas tag-along rights offer the minority shareholders the right to participate in a sale and sell their shares at the same price, and under the same terms, as the selling shareholder(s). In practice, PE investors are reluctant to accept any hampering of their drag-along rights, including by means of agree - ing to a minimum return threshold or to a minimum notice period for notifying the minority shareholders of the exercise of such rights.
10.3 IPO An IPO can be a viable exit strategy for PE and can provide high returns. An IPO can offer a full or par - tial exit, but on most occasions a significant minority stake is sold while a majority is retained by the PE sponsor to demonstrate trust and confidence to the market. PE sellers conducting an IPO often agree to be bound by a lock-up arrangement that lasts around six months after the IPO, during which they may not sell their shares. In specific instances, the lock-up period can be up to 12 months. If the PE seller retains a substantial stake in the IPO company, the issuer and seller may enter into a relationship agreement that will govern the PE investor’s role as shareholder.
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