NEW ZEALAND Law and Practice Contributed by: Ben Paterson, Cath Shirley-Brown and David Hoare, Russell McVeagh
A typical legal due diligence review for a private equity buyer will focus on the following areas: • corporate structure; • regulatory and compliance matters; • material contractual obligations (focusing on terms underpinning key revenue streams and the identi - fication of material provisions such as termination rights (including on change of control), exclusivity provisions/restraints of trade and liability under warranties and indemnities); • finance arrangements (noting that this will probably be a limited review, given existing external debt will be refinanced as part of the transaction); • real estate; • employment (focusing on accrued employee ben - efits, contractual terms for key executives and the involvement of any relevant unions); • intellectual property; • information technology; and • privacy/data protection, litigation and investiga - tions. 4.2 Vendor Due Diligence As previously noted, with M&A activity declining in the latter half of 2024 and early 2025, there has been an increase in deals being implemented by way of pri - vate treaty/a bilateral process, resulting in longer deal processes and heightened scrutiny by buyers when conducting due diligence. Prior to this (ie, in 2021 and 2022, when M&A activity was high), there were a large number of formal sale processes whereby it was common for a private equity seller to provide vendor due diligence (VDD) reports to a shortlisted group of bidders (typically accounting, tax and legal – and often commercial and insurance reports as well). The provision of a VDD report benefits the seller in that: • it permits the due diligence process to be truncat - ed (also, the process is more attractive to bidders as it reduces their transaction costs) and reduces the workload of the management of the business during the buyer due diligence phase;
• key issues that may impact transaction imple - mentation, or the value of the target business, are identified up front and potential solutions can be investigated, or the issue can be explained away; and • such a report generally helps ensure that any W&I underwriting process is straightforward. The existence of VDD reports, however, does not replace the need for a buyer to conduct due diligence. External buyer advisers will customarily conduct a full review of the VDD, including verification of sample materials and a “gap analysis” (aside from being pru - dent, this will generally be required as a condition to any bank financing and as part of any W&I underwrit - ing). Reliance on VDD reports will customarily be notified to the successful bidder via reliance letters provided by the relevant VDD advisers. The typical structure of a private equity acquisition depends on whether the target is public or private. Non-Code Companies As noted in 3.1 Primary Regulators and Regulatory Issues , a widely held or recently delisted private com - pany may constitute a Code company, in which case the acquisition structure will generally be the same as for a publicly listed target, as set out in this section (unless an exemption from the Code is granted by the Panel). Otherwise, the acquisition of a non-Code company will typically be effected through a negoti - ated SPA. Business/asset purchases are fairly rare in this space, as the seller will inevitably wish to divest itself of target business liabilities via a share sale. Whilst during 2021 and 2022 it was a “seller’s market” in New Zealand, with many formal sales processes taking place, this trend has reversed with the current economic downturn, meaning that there has been 5. Structure of Transactions 5.1 Structure of the Acquisition
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