SWEDEN Law and Practice Contributed by: Niclas Rockborn, Pär Johansson, Daniel Sveen, Arijan Kan and Erik Schwartz, Gernandt & Danielsson Advokatbyrå
AIFMD II includes enhanced regulatory requirements for AIFMs, including new rules for loan origination, improved liquidity management, expanded reporting obligations, stricter investor protection measures, and updates to sustainable finance practices. Additionally, the amendments address delegation arrangements, marketing restrictions, and rules regarding cross- border activities. A proposal for the Swedish transposition of AIFMD II is likely to be presented in late 2025. A comprehensive due diligence is typically carried out by private equity buyers, covering legal, financial, tax and various commercial matters, depending on the nature of the target’s business. The scope is also to a large extent based on the demands from provid - ers of representation and warranty insurance (RWI) to provide the necessary coverage (as RWI is custom - ary in Swedish private equity transactions). The due diligence is typically carried out in close co-operation between legal, financial and tax professional advisers, relevant experts, and representatives of the private equity buyer’s deal team. 4. Due Diligence 4.1 General Information The legal due diligence is typically reported on in an exceptions-only format, which focuses on identified red flag issues to be addressed in connection with the transaction, and typically contains limited descrip - tive information. The focus areas of the due diligence are decided upon based on the nature of the target’s business and the demands from providers of RWI to provide the necessary coverage. Typical focus areas for the legal due diligence include: • a review of the regulatory framework applicable to the business; • a review of the contractual framework for the busi - ness; • a review of the terms of key customer and supply contracts, as well as any joint venture, co-opera - tion and partnership agreements (and other agree - ments that are material to the business);
• a review of terms for management and key employees, including addressing potential reten - tion risks; • past, ongoing and upcoming or expected litigation and investigations by authorities; and • identifying other matters that are or could become impediments to the transaction and need to be handled through transaction structure, pre-signing, pre-closing or in the integration phase. Furthermore, it is common for private equity buyers to request specific compliance, insurance and ESG due diligence. In recent years, private equity funds have increased their focus on compliance matters, which has led to areas such as compliance, anti-bribery, anti-corruption, information security, processing of personal data and related matters becoming focus points of due diligence. In transactions that are financed with external loans, the due diligence reports are typically shared with the lending banks on a reliance basis. 4.2 Vendor Due Diligence In sales that are structured as auction processes, a vendor due diligence (VDD) covering financial, tax and legal issues is common. It is also becoming increas - ingly common for the seller to provide a legal guidance report. The purpose of the VDD, apart from expediting the auction process by limiting the work prospective bidders need to do in order to understand the target’s business, is to ensure that all bidders have access to the same information in order to maximise the value and comparability of the bids. If the VDD report is offered with reliance for the final bidder, it is common for a private equity buyer to instruct its advisers to perform a limited top-up due diligence of the VDD report, rather than a full-scope due diligence. A top-up due diligence would typically be limited to confirming and analysing issues identi - fied in the VDD report and performing additional due diligence on identified gaps in the VDD report or areas which are of specific interest to the buyer. The VDD report would also typically speed up the RWI under - writing process.
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