ROMANIA Law and Practice Contributed by: Ileana Glodeanu, Andreea Cărare, George Ghitu and Delia Dumitrescu, Wolf Theiss
7.7 Irrevocable Commitments Obtaining irrevocable commitments to tender or to vote by the target company’s main shareholders is very rare in Romania. Agreements to vote upon the instructions of the target or its legal representatives are null and void under Romanian law. 8. Management Incentives 8.1 Equity Incentivisation and Ownership Equity incentivisation of the management team is a common feature of private equity transactions in Romania, particularly in mid-to-large-cap deals and in sectors where management continuity and perfor - mance are key drivers of value creation. In most cases, when a private equity buyer acquires a company, a central objective is to ensure that the existing management team, with all its knowledge and experience, remains in place to support the compa - ny’s continued growth. This can make the difference between a great investment and one with only a small return. Hence, it has become critically important to create incentive compensation plans that align the management with the new owners by giving them a meaningful stake in the company. Private equity investors generally look to give man - agement incentives in order to minimise transition risk – by ensuring the company runs smoothly after the change of ownership – to retain critical knowledge and relationships of key executives, and to ensure that the management team is aligned with the new owner’s goals and long-term objectives. In roughly one-third of private equity deals, up to 5% of the equity is set aside as incentives for managers. The practice, however, is not to grant all 5% in the first year, but rather to grant amounts over a few years in order to maximise retention. 8.2 Management Participation Most commonly, a private equity fund allows the man - agement to invest in preference shares without any voting rights. However, ordinary shares are also used, especially if the investment is made in companies that do not issue preference shares (such as limited liability
• market abuse risk, particularly where the transac - tion affects the share price or could mislead inves - tors; or • merger constraints, since combining a listed tar - get with a non-listed acquisition vehicle involves complex procedures requiring delisting, prior FSA approval and enhanced transparency regarding valuation, shareholder treatment and corporate continuity. There is no statutory shareholding threshold that automatically entitles the bidder to push acquisition debt into the target. Instead, the feasibility of such structuring depends on the level of post-offer control, the resilience of minority shareholder protections and the bidder’s ability to navigate the interplay between corporate governance, capital markets regulation and financial assistance rules in practice. Squeeze-Out Mechanism Following a takeover offer, if the bidder obtained less than 100% of the voting rights, Romanian law allows the bidder to undertake a squeeze-out procedure. The bidder is entitled to require those shareholders who have not subscribed to the offer to sell all their shares at an equitable price if one of the following conditions is met: • the bidder holds at least 95% of the total number of shares that provide voting rights and at least 95% of the voting rights that can effectively be exercised; or • the bidder has acquired, within the takeover offer addressed to all shareholders for all their holdings, shares representing 90% of the total number of shares that provide voting rights and at least 90% of the voting rights targeted in the offer. The conditions, price and procedure for the exercise of these rights are strictly regulated. The squeeze-out right must be exercised within a maximum of three months of the finalisation of the takeover offer. The end result of the squeeze-out exercise is the de-listing of the target company.
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