Shopping for software businesses in France? Here’s all you need to know - Part 2

Last week, we discussed the pitfalls of sourcing software M&A acquisitions in France. Today, we are dialling it up a notch: let’s discuss what happens once you’re past the LOI stage. Namely:

• What transactions structures do and don’t work in France

• How to lose headcount without losing your mind

• What on earth are “Minefi approval” and “Loi Hamon”, and why these matter

Allez-y!   

Deal structures that are a non-starter in France

It is common for serial acquirers to use the upstream merger structure to facilitate purchase price repayment. This structure, which is commonly used in many European jurisdictions, such as Germany and the UK, entails the following steps:

• The acquirer incorporates a NewCo, which is capitalised with €1 in equity and the remainder in the form of a shareholder loan

• The NewCo acquires the shares in TargetCo

• Post closing, the two entities are merged through an upstream merger

Does this structure work in France?

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