NORWAY Law and Practice Contributed by: Karoline Ulleland Hoel, Sigurd Opedal, Ole Henrik Wille and Daniel Nygaard Nyberg, Wikborg Rein Advokatfirma AS
5.4 Multiple Investors Club deals involving a consortium of private equity sponsors are rare in Norway, largely because deal val - ue does not necessitate risk distribution across other private equity funds – a strategy often used to avoid exceeding investment concentration limits or similar restrictions. Co-investments by other investors alongside the fund (including external investors and existing limited part - ners) are, however, quite common. These investments are usually passive, with no direct involvement from the co-investors in the companies. 6. Terms of Acquisition Documentation 6.1 Types of Consideration Mechanism Primary Consideration Structures Locked-box accounts are the predominant consid - eration structure in Norwegian private equity transac - tions. In auction processes, locked-box accounts are by far the most common, as they simplify bid compari - sons for sellers. These accounts are usually audited (at least partially) and typically covered by a warranty. Completion account mechanisms are also used, where the preliminary purchase price is based on an estimate of the completion accounts balance sheet, and subject to a “true-up” adjustment post-transac - tion to reflect the final agreed values. The final com - pletion accounts are rarely audited. A fixed purchase price is sometimes applied. Deferred considerations such as earn-outs are commonly offered by private equity-backed buyers, unlike pri - vate equity-backed sellers, who require a clean exit. Earn-outs are sometimes used to bridge gaps in pur - chase price negotiations. A private equity-backed buyer may, more often than industrial buyers, offer earn-out or other forms of deferred consideration, especially when investing in start-ups (or other com - panies where valuation are based on future earnings). They will often require selling management members to re-invest a substantial portion of their proceeds, settled via sellers’ credits rather than cash. Security for deferred consideration is rarely provided by private
equity-backed buyers, although certain operational undertakings related to earn-outs may be negotiated. Escrow Use of escrow arrangements is rare in the Norwegian market and private equity deals, regardless of whether the seller or buyer is a private equity player – primarily because most private equity deals now include war - ranty and indemnity (W&I) insurance. Leakage Provisions Whenever locked box accounts are applied, leakage provisions are usually also included, regardless of whether the seller is backed by a private equity firm (although leakage provisions may be more refined in private equity deals). In a completion accounts mechanism the post-trans - action “true-up” adjustment will adjust for relevant leakage. 6.2 Locked-Box Consideration Structures Locked-box consideration structures are commonly used in Norwegian private equity transactions. Inter - est on the locked-box amount is normally applied and predominantly in auction processes, usually in the range between 2–5%, depending on, inter alia, the expected cash flow of the target group in the relevant period. Leakage occurring during the locked-box period is usually not charged with interest. 6.3 Dispute Resolution for Consideration Structures Separate dispute resolution mechanisms for locked- box consideration structures are not common. For completion accounts structures, a separate dispute resolution mechanism is almost always used to resolve disagreements. 6.4 Conditionality in Acquisition Documentation In private equity transactions, conditions precedent relating to regulatory approvals, such as no interven - tion by the NCA or FDI, are always included (if rel - evant). Other typical conditions precedent include:
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