SINGAPORE Law and Practice Contributed by: Evelyn Wee, Sandy Foo, Tracy-Anne Ang, Terence Quek, Hoon Chi Tern, Goh Jun Yi and Tricia Teo, Rajah & Tann Singapore LLP
5.3 Funding Structure of Private Equity Transactions Financing Private equity deals in Singapore are normally financed by traditional bank financing, and banks are gener - ally willing to support leveraged finance transactions where the track record of the sponsor and the quality of the target assets are not an issue. For leveraged buyout structures, Singapore abolished the concept of financial assistance for private companies (which facilitates debt pushdown) in 2015, but financial assis - tance prohibitions (with exemptions) continue to apply to public companies and their subsidiaries. For public takeovers and mergers, it is generally not permitted for business combinations to be conditional on the bidder obtaining financing. Commitment Letter For acquisitions of private/unlisted targets, equity commitment letters are common, although satis - factory evidence of debt financing will also often be expected in competitive processes. A financing condi - tion is subject to negotiations between the buyer and seller, although not typically included in transaction documentation. For acquisitions of public/listed targets that are gov - erned by the Takeover Code, the firm intention to undertake an offer requires an unconditional confir - mation by the offeror’s financial adviser (or by another appropriate third party) that the offeror has sufficient resources available to satisfy full acceptance of the offer. Accordingly, the financial adviser to the offeror will need to conduct due diligence, and review and be satisfied with the sources of financing. An equity com - mitment letter may not suffice, as these increasingly need to be supplemented by debt financing docu - ments that are capable of being drawn on if necessary. Stakes Private equity deals see a good mix of control deals versus minority investments. Traditionally, private equity deals have seen private equity funds taking a majority or control stake but there is now also a trend towards significant minority investment deals.
Given that VDD is not an established common prac - tice for M&A deals generally, there is also less familiar - ity with and less acceptance of VDD reports. Bidders typically still conduct fairly extensive due diligence, even where a VDD report is available. Where there is VDD, the starting position is usually for the VDD reports to be provided on a non-reliance basis to bidders, although there is a gradual increase in transactions where the successful bidder/buyer will be granted reliance. Acquisition structures are usually determined by the nature of the target and its assets rather than the iden - tity of the buyer (whether private equity or otherwise). Private/Unlisted Companies For the acquisition of private/unlisted companies, such acquisitions will be by way of private treaty sale and purchase agreement (whether through bilateral negotiations or through an auction process). Generally speaking, share acquisitions are more common than asset acquisitions. Public/Listed Targets For public/listed targets, acquisitions (assuming con - trol deals) will either be by way of general offers (vol - untary being more common than mandatory) or court- approved schemes of arrangement. As private equity transactions are often leveraged, the “all or nothing” nature of schemes of arrangement lends itself better to debt “pushdown” and is often favoured where there is reasonable confidence that the necessary approval thresholds can be met. 5.2 Structure of the Buyer It is common for the fund making the acquisition to set up a holding company that, in turn, holds a special- purpose vehicle as the buyer entity (“Bidco”). Repre - sentatives of the fund shareholder will be appointed to the board of the Bidco, but it is the Bidco that con - tracts with the seller. The fund itself will not usually be involved in or party to any contractual documentation (other than perhaps an equity commitment letter). 5. Structure of Transactions 5.1 Structure of the Acquisition
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