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
These minority/partnership investments in buyout transactions could be a reflection of the Asian private equity market, where intrinsic value is tied to the oper - ational know-how and relationships of family owners and family-linked conglomerates, even though there is a desire for professional managers to take the busi - nesses forward. Private equity deals (especially the higher-value ones) are frequently entered into by a consortium, compris - ing private equity sponsors but also other investors investing alongside them. Broadly speaking, it is more common to see existing controlling shareholders/management as co-investors in these consortiums than other limited partners or private equity sponsors as direct investors (rather than through private stakes). However, there are notable exceptions, such as the acquisition of Boardroom Limited in 2021 by Apricus Global Pte Ltd (which is controlled by a consortium comprising Capsol Invest - ment III Pte Ltd, an independently managed indirect wholly-owned subsidiary of Temasek Holdings (Pri - vate) Limited and Tower Capital Corporate Services LP, a limited partnership set up in Singapore and man - aged by Tower Capital Asia Pte Ltd) 5.4 Multiple Investors Consortium Arrangements 6. Terms of Acquisition Documentation 6.1 Types of Consideration Mechanism Transaction Terms: Private Acquisitions Consideration structures that entail post-completion audits and consequential purchase-price adjustments are more common in the sale of private companies than locked-box mechanisms, although private equity sellers would usually prefer and insist on the latter. Earn-outs are not typically used where the buyer and the seller want a clean break after the acquisition is complete. A private equity fund looking to divest a portfolio entity at the tail-end of its fund cycle, for example, will not be inclined to accept earn-out as a form of deferred payment. Conversely, where private equity investors are buyers, earn-outs to incentivise management sellers would be common.
Generally speaking, private equity buyers are less like - ly to provide protection for consideration (whether in the form of a guarantee or enforceable commitments) than a corporate buyer would. 6.2 Locked-Box Consideration Structures Interest on leakage for locked-box consideration remains a negotiated point in most deals and there is no established norm, especially because locked- box mechanisms are not that widespread in the first place. However, in most cases it is unlikely that inter - est would be charged. 6.3 Dispute Resolution for Consideration Structures In locked-box and completion accounts adjustments, it is fairly common for sale and purchase agreements to provide for resolution of disputes via expert deter - mination by an independent accountant, rather than resort to a dispute resolution mechanism. 6.4 Conditionality in Acquisition Documentation Conditionality of deals is usually a heavily negotiated area and there is no “standard” norm. Private equity sellers will usually insist on certainty of transaction and will not agree to conditions other than those that are absolutely necessary or manda - tory/regulatory. Financing conditions are generally resisted and are relatively rare, whereas limited material adverse change clauses are usually agreed to. 6.5 “Hell or High Water” Undertakings “Hell or high water” undertakings are not common in Singapore, and private equity-backed buyers will resist this very strongly. 6.6 Break Fees Break fee arrangements are permitted but uncommon. Reverse break fees are even more rare in Singapore. For private M&A transactions, parties should be mind - ful that a proposed break fee may constitute a penalty, and consequently not be enforceable if it does not
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