1.1 What are the most common types of private equity transactions in your jurisdiction? What is the current state of the market for these transactions? Have you seen any changes in the types of private equity transactions being implemented in the last two to three years?
A broad range of private equity ("PE") transactions are carried out in Ireland, the most common including leveraged buyouts, refinancings, trade sales, secondary buyouts, bolt-on deals and secondary transactions.
The Irish PE market grew in 2017. The last two to three years have seen some new PE entrants to the Irish market with traditional bank acquisition financing being more difficult to obtain, particularly for small- to medium-sized businesses.
1.2 What are the most significant factors or developments encouraging or inhibiting private equity transactions in your jurisdiction?
- a low corporate tax rate – corporation tax on trading profits is 12.5% and the regime does not breach EU or OECD harmful tax competition criteria;
- the regulatory, economic and people infrastructure of a highly-developed OECD jurisdiction;
- the benefits of EU membership and of being the only English-speaking jurisdiction in the eurozone;
- a common law jurisdiction, with a legal system that is broadly similar to the US and the UK systems;
- refundable tax credit for research and development activity and other incentives; and
- an extensive and expanding double tax treaty network, which includes over 70 countries, including the US, UK, China and Japan.
2 Structuring Matters
2.1 What are the most common acquisition structures adopted for private equity transactions in your jurisdiction? Have new structures increasingly developed (e.g. minority investments)?
PE transactions are usually structured using a holding company ("Holdco") and an indirect wholly-owned subsidiary of Holdco ("Bidco"). Holdco is commonly owned by the PE fund and management, as majority and minority shareholders, respectively. Holdco can take the form of an offshore vehicle, although it is usually Irish or UK tax resident.
Bidco's primary role is to acquire and hold the target's shares and it may also act as borrower under the debt facilities. For tax- and/ or financing-related purposes, it is common to have intermediate holding companies inserted between Holdco and Bidco.
For inbound investments, Bidco is typically a private limited liability company resident, for tax purposes, in Ireland. The jurisdiction of incorporation of Bidco can vary and may be onshore or offshore. Minority investments have become more common. See question 2.6 below.
2.2 What are the main drivers for these acquisition structures?
There are a number of factors which affect the acquisition structure adopted in PE transactions. These drivers include: (i) the tax requirements, capacity and sensitivities of the PE house, management and target; (ii) the finance providers' requirements; and (iii) the expected profile of investor returns.
2.3 How is the equity commonly structured in private equity transactions in your jurisdiction (including institutional, management and carried interests)?
PE investors typically use small proportions of equity finance to subscribe for ordinary or preferred ordinary shares in Holdco. The balance is generally invested as a shareholder loan (often structured as loan notes issued by Holdco), or preference shares.
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Previously pubished in The International Legal Comparative Guide
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