Nordic MA Deal Terms Tim Wright Head of

Nordic M&A Deal Terms Tim Wright – Head of European Private Equity

The Nordic Place in the Global M&A 1250 1000 75 750 50 500 25 250 0 Deal Count Deal Value (€bn) • Increasing significance and 2018 was a vintage M&A Year 0 2012 2013 2014 2015 2016 2017 2018 • 15. 7% (Q 1 -Q 3) of European M&A • "Intra Nordic" deals – still a majority but overseas investment increasing www. dlapiper. com UKM/95333875 2

The Nordic M&A Marketplace • PE was a key reason for the Nordic M&A growth • Euro 21. 2 bn in value • across 224 buyouts • Same reasons for growth as elsewhere in Europe • massive amounts of dry equity powder • cheap and plentiful debt • Nordics remain highly attractive (not least because tech as a sector remains "hot") • Nordics' comparatively stable macroeconomic environment • Perceived as safe and open jurisdiction www. dlapiper. com UKM/95333875 3

Impact on Deal Terms • Whilst a lot of M&A remains intra-Nordic, overseas involvement is increasing • Nordics attracting Chinese investment due to liberal trade and investment policies and the range of potential targets • This is showing in deal terms • increasingly competitive processes anyway • accentuated by greater international involvement increases the influence of different approaches • PE (and especially international London-based PE) is aggressive on terms when selling – especially when advised by London based law firms www. dlapiper. com UKM/95333875 4

PE has been a buyer Private Equity Trends 2012 -2018 30 25 Deal value (€ bn) 20 15 10 5 0 2012 2013 Buyout Deal Value www. dlapiper. com UKM/95333875 2014 Exit Deal Value 2015 2016 Buyout Deal Count 2017 2018 Exit Deal Count 5

So what has been the impact on Deal Terms? • This is not one lawyer's view of market; this is based on a detailed analysis of over 2, 000 private M&A deals • Vintage: 2014 – 2018 • Geographic split: • 238 Nordic • 967 other Northern European • Warnings though: • some sector bias – DLA's tech strength comes through • PE – same thing ( 25% of our deals are PE v 15% market share) www. dlapiper. com UKM/95333875 6

General themes • Typical M&A terms are different between jurisdictions • The key factors that influence legal terms are: • The geography of the transaction • The type of the buyer – Trade or PE • The type of the seller – Trade or PE • The process – auction v non-auction • The size of the deal • Sector – by far the least important apart from a limited number of specifics www. dlapiper. com UKM/95333875 7

Auctions: increasingly common • Auctions more and more common especially lower down the market • For sub Euro 50 m EV deals 15% were by auction. Above Euro 50 m 37% were by auction. • PE sellers are far more likely to use auctions: • 64% of European PE exits over Euro 100 m were by auction – in the Nordics it was 85% • 16% of Trade sales over Euro 100 m were by auction • Auctions do drive better legal terms for sellers: • Certainty on price • Certainty of deal • Warranty exposure www. dlapiper. com UKM/95333875 8

Deal Terms: the rise of the "Locked Box" • Locked box mechanisms deliver certainty to sellers of price and have an extremely low incidence of claims compared to completion accounts where the opposite is true • One of the more important battles for a buyer to win • Auctions help win that battle – a locked box mechanism is 46% more likely in an auction as opposed to a non-auction process • Locked box is seen more often (10 years ago it was uncommon) in the Nordics but • its usage is a function of deal size: • 57% of Nordic deals over Euro 50 m have locked box • 31% of sub Euro 50 m Nordic have locked box • Auction v non-auction has only a marginal impact on Euro 50 m + deals – 8% www. dlapiper. com UKM/95333875 9

Deal Terms: greater certainty at signing • Many deals have to have a gap between signing and closing • For a seller it is critical to ensure that a buyer has the least opportunity to walk (or equally importantly to threaten to walk away) • A point of much debate is therefore around the material adverse change clause or "MAC" – which gives the buyer the right to walk away from the deal after signing if the situation in the target (or less commonly) the market changes • MACs were found in 67% of Nordic auction deals v 33 % of European deals • This is in stark contrast to the UK where only 8% of auction deals had a MAC in 2018 • The nature of the seller is key – a trade seller is more than 3 times more likely to give a MAC than a PE seller www. dlapiper. com UKM/95333875 10

Warranties and PE • Across the globe Trade Sellers will give warranties ………. PE less so • UK is the most extreme example • US – PE houses will but liability limited to a general escrow ( typically 10%) • France – picture is becoming more mixed • Nordics • PE houses do but often tend to be limited unless there is a W&I policy • What you tend not to see is Management giving warranties by themselves • Will this change? www. dlapiper. com UKM/95333875 11

W&I: the continued rise • In Europe it is a standard transactional tool in most Northern European jurisdictions and becoming widely accepted • In the UK actually only a marginal increase in 2017 from 2016 • Nordics remain very popular for W&I www. dlapiper. com UKM/95333875 12

Earn outs • We see a greater use of earn outs: • 37% in the Nordics v 25 % Global • However less a feature of the heat of the market and more a reflection of the greater of the influence of the Tech sector where earn outs are more common • Where used then they tend to be based on profits (63%) with turnover only in 23% of cases. www. dlapiper. com UKM/95333875 13

Deal terms: the future • We do think that there will be tensions as the impact of international counterparties and PE is felt more strongly. • But the forces are not all pulling in the same direction: • European large cap PE is more likely to drive seller friendly terms • US trade buyers and to a lesser extent Asian buyers would drive more buyer friendly terms • Processes are likely to become faster: • at the moment many formal processes do not last the full timetable; pre-emption is increasingly common • even if there is a conclusion of Round 2 then the gap between a bidder being selected and signing can be a matter of days not weeks www. dlapiper. com UKM/95333875 14

Warranties • Nordic tradition of short warranties continues compared to the longer Anglo-Saxon approach • Time limits – remarkably consistent across the years and a bit more buyer friendly: • Sub 18 months – 3% (Nordics) 14 (UK) 9% (CE) • 18 months – 59% (Nordics) 57% (UK) 44% (CE) • 2 years - 97% (Nordics) 96% (UK) 75% (CE) • Strangely in auction processes in the Nordics the time periods got longer – only 36% of auction deals were 18 months • Caps are comparatively low - Auctions 66% had caps of 20% or lower v 47% in CE and 50% in the UK • Thresholds are higher – most common being 0. 75% to 1% - and 83% are triggers not excesses • Data Rooms are almost always generally disclosed 93% www. dlapiper. com UKM/95333875 15

The continued rise of the Management Adviser • The Nordic region tends to be more US in its approach to management incentives. • This contrasts with the UK and France where separate management financial advice is standard and often provided by specialist firms. • Why does it matter? • Failure to appreciate places Nordic bidders operating outside the Nordics at a competitive disadvantage • On larger deals it is coming to the Nordics • More Anglo-Saxon players in the Nordics • Bridgepoint • Hg • Virtuvian www. dlapiper. com UKM/95333875 16

The Rise of the Management Adviser • They are already here • They are already advising: ATOS Medical (Nordic Capital); Broadnet (EQT); Dometic (EQT); Envirotainer (Cinven); Georg Jensen (Investcorp); Helly Hanson (Canadian Tire Corporation); Phadia (Cinven); Scandlines (First State / Hermes); Ullink ( Nordic Capital) www. dlapiper. com UKM/95333875 17

Key differences between a UK and Nordic equity terms • Nordic economics tend to be less generous • Pot size is smaller - 6 to 8% compared to 15 - 20% in the UK • Tend to be more money multiple – less risky but as amount of investment is smaller so are receipts • Lower risk but lower reward • Nordic Schemes are spread more widely • More use of warrants in the Nordics – very rare in UK • Leavers are treated more harshly • even good leavers tend to have time vesting concepts • Rollover strip – more likely to be attacked • Tax treatment is less good www. dlapiper. com UKM/95333875 18

About DLA Piper 40+ COUNTRIES 90+ OFFICES 8 10 GLOBAL PRACTICE AREAS GLOBAL SECTORS Corporate Consumer Goods & Retail Employment Energy & Natural Resources Financial Services Finance and Projects Industrials Intellectual Property and Technology Infrastructure, Construction & Transport Litigation and Regulatory Insurance Life Sciences Real Estate $2. 8 214 K Global revenue in $USD billions for 2018 Pro bono and community engagement hours donated in 2018 www. dlapiper. com UKM/95333875 Media, Sport & Entertainment Restructuring Real Estate Tax Technology 19

DLA's Corporate practice • With almost 1, 000 lawyers worldwide, our Corporate group advises many of the world's leading and emerging companies, as well as financial institutions and buyout and investment funds We advise on mergers and acquisitions, IPOs, public and private equity and debt offerings, venture capital and private equity investments, corporate governance and corporate responsibility and other transactional matters. In addition to their core areas of practice, all of our lawyers are aligned to specific industry sectors Recognition • Ranked #1 for number of Global M&A deals 2010 -2018 • Ranked #1 for number of European M&A deals 2013 -2018 Our lawyers have substantial experience in project managing intricate, multi-jurisdictional, corporate activities worldwide. Our clients • Ranked #1 for number of European Buy out deals 2018 benefit from our ability to flag potential pitfalls in each country, to • Ranked #1 for Nordic M&A 2018 advise on cultural differences and nuances, and to manage the most • Ranked #1 for Danish M&A 2018 demanding due diligence exercises • Global-wide TMT (Band 1) – Chambers 2018 Every year since 2015 we have annually presented the results of a market-leading database of private M&A deals – at over 2, 000 deals it • European-wide TMT: Information Technology (Band 1) - Chambers is the biggest database of its type; allowing our lawyers and our 2017 clients to really understand what market is • "European Mid-Market Legal Advisor of the Year" 2007, 2010, This year once again the results will be presented in over 15 2011, 2012, 2015, 2016 (FT/ Mergermarket European M&A global locations Awards) If you are interested in attending one of our seminars please contact Charlotte Marsden at Charlotte. Marsden@dlapiper. com www. dlapiper. com UKM/95333875 20

Thank you www. dlapiper. com UKM/95333875 21

DLA Piper is a global law firm operating through various separate and distinct legal entities. Further details of these entities can be found at www. dlapiper. com. This publication is intended as a general overview and discussion of the subjects dealt with, and does not create a lawyer-client relationship. It is not intended to be, and should not be used as, a substitute for taking legal advice in any specific situation. DLA Piper will accept no responsibility for any actions taken or not taken on the basis of this publication. This may qualify as “Lawyer Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome. Copyright © 2019 DLA Piper. All rights reserved. 22