SWEDEN Law and Practice Contributed by: Niclas Rockborn, Pär Johansson, Daniel Sveen, Arijan Kan and Erik Schwartz, Gernandt & Danielsson Advokatbyrå
10.3 IPO Elevated valuations rendered favourable IPO exit conditions in the period of 2017–2021, whilst gener - ally lower valuations of public companies since 2022 has, on the whole, resulted in less favourable IPO exit conditions, and as a consequence the IPO activity in Sweden ground to a near halt in 2022 and 2023, slowly returning during 2024 and the first half of 2025. The typical lock-up arrangement for a private equity seller restricts the sellers that remain shareholders following the flotation from selling their shares (and other financial instruments in the issuer), typically for a period of 180 calendar days. The restriction is nor - mally subject to several customary exceptions, for example, intra-group transfers and public takeover offers. While it is uncommon, the lock-up can also be waived by the investment bank(s) before the lock- up period has expired. Relationship agreements are generally prohibited.
Dual-track is the starting point for most mid- and large-sized transactions, with enhanced focus either on IPO or trade sale depending on market condi - tions. Triple-track exits have been and continue to be uncommon. Continuation funds have emerged as an alternative exit route for private equity funds that want to keep well-performing assets as their funds near the end of their terms, or that otherwise need additional time to provide sufficient returns. Given the uncertainties in the stock market over the last few years, trade sales have become the predom - inant exit route, whereas during the last five years before 2022, mid- and large-sized exits were more Drag rights entail an obligation for minority holders (both management and employee shareholders, and institutional co-investors) to sell their shares to a buyer elected by the private equity fund on terms not less favourable than those offered to the private equity fund as majority holder. The typical drag threshold in Sweden is 50%, or a change of control of the target. Shareholder agreements in Sweden typically include drag rights for the private equity fund as majority own - er, in order to secure the possibility to sell 100% of the equity in the target business at exit. Usually, the drag right does not have to be formally enforced. It is most common that dragged sellers sell through the main transaction document (often by adherence), but it does occur that dragged sellers sell through separate short-form agreements. commonly conducted as IPOs. 10.2 Drag and Tag Rights As a trade-off for agreeing to drag rights, manage - ment, employee and other minority shareholders (including institutional co-investors) typically enjoy tag-along rights in the sale when the private equity fund majority shareholder sells its shares in the com - pany in a trade sale or by floatation. The typical tag threshold is the same as the drag threshold.
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