France
Answer ... The investment process is usually launched when the private equity investors submit a non-binding letter of intent to the target’s shareholders. The letter of intent outlines some of the basic fundamental terms of the intended transaction, sets out a provisional schedule for its completion, and generally contains confidentiality and exclusivity provisions.
Once the letter of intent has been accepted by the sellers, due diligence reviews are conducted by the private equity fund together with some negotiation. On average, this process can take from one to three months, depending on the seller’s responsiveness to information requests and the scope of such reviews.
If the results of due diligence reviews are satisfactory, a binding acquisition agreement is negotiated and executed by the shareholders and the private equity investors, usually in the form of a share purchase agreement (SPA). This step is generally referred to as the ‘signing’.
France
Answer ... The length, depth and scope of due diligence reviews depend on several factors, such as:
- the size of the target;
- the nature of the business;
- the scale of the transaction (ie, whether investors seek to acquire a minority or a majority stake in the company); and
- the perceived level of risk.
Most of the time, due diligence investigations cover a wide range of areas, including intellectual property, commercial contracts, insurance, claims and ongoing litigation, human resources, real state, taxation, corporate documentation and financial statements.
To better assess the legal consequences of the intended transaction, it is very important to identify change-of-control provisions in any contract or agreement entered into by the target.
Documents required for due diligence investigations are usually disclosed through virtual data rooms. Such documents may contain sensitive information about the target and/or its operations. Therefore, it is very common that sellers require prospective buyers to sign non-disclosure agreements before granting them (or their counsel) access to such data room.
France
Answer ... Following the contract law reform enacted in 2016, new Article 1112-1 of the Civil Code imposes on sellers a general obligation of information based on good faith. Henceforth, sellers have a duty to disclose to buyers any information of significance relating to the object of the sale (other than an estimation of its value) before the contract is signed or formed. In case of non-compliance, the seller may be liable to pay damages to the buyer or the contract may be declared void. This is why it is so important to provide or obtain (as the case may be) complete and accurate information during the due diligence process.
France
Answer ... In general, it is very common for both investors and sellers to appoint lawyers and financial advisers (eg, investment bankers) to assist them throughout the investment process.
The primary role of such advisers is to assess the fairness of the terms of the proposed transaction and provide guidance to their respective clients to improve the outcomes of negotiations.