Private Equity Newsletter - Winter 2014 Edition: It is Time for Public to Private Deals in France for PE Funds

by Dechert LLP

With covenant pressure, softness on business plans and uncertainties on market perspectives, mid-cap listed companies are facing increased downward pressure on their stock prices, luring private equity specialists and strategic buyers to venture into public to private deals (P2P). Over the past two years, P2P deals in France have surged by more than 130%, and corporates are almost three times more active than PE funds in those deals.

Despite high legal thresholds, P2P deals are generally successful in France

In France, the squeeze-out rules demand a 95% threshold to start a mandatory squeeze-out. This has discouraged a number of non-French private equity houses from considering P2P deals in France. Despite this 95% threshold, which is higher than in many other countries, most deals, if adequately prepared, are successful. Indeed, our research shows that 85% of the P2P deals achieve the expected result. Only a few “horror stories” resulted, where PE funds ended up “in the middle of the road” -- with only a fraction of the equity but unable to achieve a take private transaction.

As in the United States, minority shareholders and arbitrageurs can attempt to block a deal by acquiring a stake and refusing to tender it. They can also attempt to start a judicial guerilla which is sometimes successful, especially in active jurisdictions like the Paris Courts, where procedures can take a few months before being trialed. The ongoing attempt of Fosun/Ardian to take ClubMed private is a good example of this situation, and the case is currently being processed by Paris Court of Appeals. The case also highlights the need for fair consideration and a robust financing that can withstand the delay of litigation.

Nonetheless, the courts tend to lean towards those initiating P2P and against dissenting shareholders that are viewed as troublemakers if they cannot demonstrate valid business grounds for resisting the deal. For example, the Paris Commercial Court recently ruled in the Radiall case that a hedge fund that held shares for three years and consistently opposed a squeeze-out (because it wanted a higher consideration) should not be accounted for in the floating on which the 95% threshold applies. The court’s rational was that if a shareholder holds a position for more than three years and consistently voted in a certain fashion, then such investor is not acting like typical floating shareholder but as a shareholder with a control intention, and therefore should be disregarded in the calculation of the floating. In this particular case, the fund promptly reallocated shares to avoid being still for the considered period, but the decision will likely put strong pressure against a similar strategy. 

The second strong incentive for P2P in France is price 

The premiums that are legally required for P2P are relatively low in France. Our research indicates that over the past two years they averaged 19.75% above the discounted cash flows (a generally accepted index for future performance), and 43.20% above the market stock price, which remained consistently depressed during this period. The difference between premium of stock price vs. premium above DCF is a good indicator that the stock market was trading below what it should, according to financial analysis standards.

Certain strategies have proved to be more successful when making a P2P. Simplified tender offers (offre publique d’achat simplifiée) are predominantly used (47.8%) for P2P deals. This indicates that, in France, P2P deals are generally the result of a medium or long term strategy, where the future buyer first acquired a block of at least 50% of the shares or voting rights of the target, and then launched a take private deal. 

If you aggregate regular tender offers with simplified tender offers, followed by a separate squeeze-out, then the chances of success are the greatest, compared to deals where buyers included the squeeze out directly in the tender offer/simplified tender offer, which increase the risk of failure. 

We believe this is caused by two reasons:

  1. fairness in consideration is highly scrutinized, and it is better to go through this process once a strong position is established; and
  2. contrarian investors are more tempted to derail an “all inclusive deal” where the squeeze-out is already contemplated, than in deals where a +5% will not necessarily have an adverse impact on the entire transaction.

Finally, French regulation enables deals to complete fairly quickly, with a typical timeline between the fairness opinion and the tender offer of 75 to 90 days.

There is definitely a window of opportunity for P2P in France.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dechert LLP | Attorney Advertising

Written by:

Dechert LLP

Dechert LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.