NEW ZEALAND Law and Practice Contributed by: Ben Paterson, Cath Shirley-Brown and David Hoare, Russell McVeagh
completion. This will typically be based on an interest rate on the enterprise value or equity value of the tar - get business (to be negotiated), or on a rate reflecting the cost of capital for the target business. In some circumstances (for example, where there is a long period between the locked-box date and completion due to OIO requirements), the parties may negotiate the rate to ratchet upwards after a certain time period. It is not common to see interest charged on any leak - age payment. 6.3 Dispute Resolution for Consideration Structures It is uncommon to have a separate dispute resolution regime for locked-box disputes. These are typically only subject to the dispute resolution provisions in the SPA (customarily New Zealand courts). However, it is common for there to be a requirement that any dispute in relation to completion accounts should be referred to an independent expert for deter - mination (which will be binding on the parties, except in the event of manifest error or omission). 6.4 Conditionality in Acquisition Documentation This section covers non-Code transactions. For trans - actions involving Code companies, see 7.5 Condi- tions in Takeovers . The objective of any seller in New Zealand, whether corporate or private equity, will be to have as few con - ditions as possible. There are two customary categories of conditions, as follows: • any conditions required from a legal/regulatory standpoint – for example, OIO or NZCC con - sent, or shareholder approval for a listed entity in accordance with the NZX Listing Rules (a regula - tory condition); and • assuming a regulatory condition is required, the buyer will usually seek protection for the period between the signing and closing of the SPA in the
form of a MAC clause (although in a competitive bid situation, it may look to differentiate its bid by limiting or omitting this concept, depending on the nature of the target business and its appetite for any related risk). If there is a regulatory condition, a seller will typically require that as much of the work as possible that is required to satisfy that condition is done prior to the signing of the SPA, to minimise the conditional peri - od. By way of example, in a competitive bid situation where the acquisition is subject to OIO approval, the seller will usually expect the buyer to have progressed its application in parallel with the SPA, in order that it can submit this as soon as possible following signing (or alternatively, in advance of signing). MAC clauses are generally highly negotiated and tied to specific value impacts. Potentially, a MAC may be tied to breach of warranty or breach of a pre- completion covenant. In negotiating a MAC clause, parties will focus carefully on carve-outs relating to force majeure-type events (noting the impact of the pandemic). Other types of conditions – for example, board/invest - ment committee approval, shareholder approval (oth - er than in a listed company scenario), financing or change-of-control approval in respect of material con - tracts – are very unusual in the private equity trans - action space (although they may be negotiated on a case-by-case basis). 6.5 “Hell or High Water” Undertakings As in other jurisdictions, it is unusual in New Zealand for a private equity buyer to accept a “hell or high water” undertaking in respect of a Regulatory Condi - tion. This type of undertaking (most typically seen in pro - visions regarding antitrust) requires a buyer to take whatever steps need to be taken – which could include divestments or compliance with onerous undertakings – to ensure that the relevant regulatory approval is granted. This can be particularly difficult for a private equity fund, which is likely to have a number of differ - ent businesses across its portfolio, as to do so would
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