FRANCE Law and Practice Contributed by: Bertrand Barrier, Anne Toupenay-Schueller and Cyril Deniaud, Jeantet
French and EU regulatory requirements, and reduced listing costs and administrative burden compared to cross-border listings. 3.3 Impact of the Choice of Listing on Future M&A Transactions The choice by a French company to list on a foreign exchange could impact the feasibility of a future sale, particularly regarding a squeeze-out mechanism. Under French law, following a successful tender offer, a bidder holding 90% of the share capital and voting rights may compel the remaining shareholders to sell their securities at the offer price. However, this squeeze-out right is only available for takeover bids conducted under French regulations and supervised by the French Financial Markets Authority ( Autorité des marchés financiers or AMF). Therefore, listing abroad would likely remove access to France’s statutory squeeze-out mechanism, poten- tially leaving minority shareholders indefinitely in place and complicating the full-ownership transfers neces- sary for restructuring or tax-consolidation purposes. 4. Sale as a Liquidity Event (Sale of a Privately Held Venture Capital- Financed Company) 4.1 Liquidity Event: Sale Process The structure and execution of a corporate sale pro- cess is largely determined by the seller’s profile. Where the seller is an investment fund holding a major- ity stake, the transaction typically proceeds through an open auction process. Conversely, when the sale is initiated by an investment bank, the process generally takes the form of a con- trolled or targeted auction involving a limited number of pre-selected potential acquirers. 4.2 Liquidity Event: Transaction Structure In France, the prevailing transaction structure for the disposal of privately held technology companies with venture capital backing is a share purchase agree-
ment encompassing the entire issued share capital. Venture capital investors typically favour complete exit strategies to maximise returns on investment. Notwithstanding this general approach, in certain circumstances – particularly where the acquirer is a strategic investor or established technology enter- prise – venture capital funds may negotiate to retain a minority equity position where significant future value- creation potential is anticipated. The current market trend, however, favours full acqui- sitions, which streamline corporate governance struc- tures and ensure alignment of interests between the acquiring entity and the executive management. 4.3 Liquidity Event: Form of Consideration In France, most transactions are structured as cash deals rather than stock-for-stock transactions. The most common form of acquisition, especially for larger businesses, is the purchase of shares, and most com- monly, the purchase price is paid in euros. However, a consideration by way of shares is also possible. Offering a consideration in kind is often complex and requires a thorough review of the value of the offeror’s shares and of the offeror itself. In cer- tain situations, the bidder must offer an alternative consideration in cash. Purchase price adjustments are common, typically stated on a “cash-free debt-free” basis with adjust- ments based on target working capital. Combina- tions of cash and deferred consideration mechanisms such as earn-outs are sometimes used, particularly in smaller transactions or where management continuity is key. 4.4 Liquidity Event: Certain Transaction Terms In early venture financing rounds, founders often provide personal representations and warranties (“back-up” reps) covering both company-related and personal matters. However, these obligations typi- cally disappear after the Series A stage as founders’ knowledge becomes less comprehensive. In exit transactions, venture capital investors usually limit their warranties to ownership and authority to
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