Sweden
Answer ... The process is generally relatively standard and does not differ from that in most other jurisdictions.
Auction processes are often preferred by the seller. In such processes, following negotiations of the non-disclosure agreements, the potential buyers get a chance to review high-level information such as an investment or information memo and limited financials, before indicative offers are due. In the second round, following the seller’s review of the bids, a handful of bidders get the chance to conduct full due diligence of the target. During the diligence phase, the bidders are also provided with the seller’s proposed transaction agreements, which must be turned by the bidder and subsequently negotiated between the parties. Bidders are also offered restricted access to management of the target at this point. Such access is also necessary for the private equity bidder to present its management reinvestment offer, which is a crucial milestone in the transaction.
Warranty and indemnity (W&I) insurance is the norm, so sellers tend to have a stapled insurance solution prepared, which also means that the warranties provided in the transaction documents are usually fully covered by the insurance. Following review of the final bids and the selection of a winner, there is a short timeframe (usually no more than 72 hours; often less) during which the W&I process is finalised before the transaction is executed.
On occasion, bidders will try to pre-empt the auction process by offering to acquire the target on a very short exclusivity period, thus creating a bilateral process. This is particularly prevalent in situations where the target is highly desirable and a particular sponsor is eager to acquire the target quickly. Bilateral processes are also often used in situations where:
- the target is regarded as less desirable and an auction process therefor is less likely to yield a higher price than that offered by the pre-empting bidder; and
- the enterprise value of the target, relatively speaking, is lower.
Management is often invited to reinvest in the transaction. The management shareholders’ agreement and reinvestment documents are usually negotiated in conjunction with the negotiation of the main transaction documents. Management is usually represented by separate counsel, so as to avoid conflicts of interest.
Sweden
Answer ... It obviously depends on the target, but certain focus areas are generally given specific attention. Tax and accounting diligence is normally very detailed. Legal can vary, but every document offered to the bidder in due diligence must be reviewed, as the norm in sale and purchases governed by Swedish law is that every piece of information offered in due diligence is deemed disclosed to the bidder (and thus qualifies the warranties).
Reporting has become more professional and to the point (materiality thresholds for findings are often linked, if possible, to de minimis thresholds in the sale and purchase agreement and deductible in the W&I policy), Most sponsors try to avoid receiving lengthy, descriptive reports in favour of red flag reports reporting only on deviations from the norm.
Sweden
Answer ... As market practice dictates that the entire data room be disclosed under the purchase agreement, sellers generally tend to include a lot of information in the data room. This obviously does not apply where the potential buyer is a competitor, in which case it is not unusual to have the advisers to the bidder set up clean teams which can review the information, but not disclose sensitive information to the bidder.
Both W&I underwriters and loan provides require relatively comprehensive diligence reports, or at least evidence that the diligence review has been thorough, in order to support a transaction.
Sweden
Answer ...
- Fund representatives, advisory team, legal, financial and other due diligence advisers (eg, environmental, commercial);
- Debt providers and their advisers;
- The target’s debt provider and its advisers;
- The seller’s representatives, investment bank, financial and legal advisers;
- Target management and their legal adviser; and
- The W&I insurance broker and legal adviser (possibly also accountants).