Acquisition and exitAcquisitions of controlling stakes
Are there any legal requirements that may impact the ability of a private equity firm to acquire control of a public or private company?
If a buyer, solely or along with related parties, exceeds certain thresholds, commencing at 33 per cent of shares or voting rights, of a publicly listed company, said buyer (and related parties) must submit a tender offer for the purchase of 100 per cent of the shares of the company.Exit strategies
What are the key limitations on the ability of a private equity firm to sell its stake in a portfolio company or conduct an IPO of a portfolio company? In connection with a sale of a portfolio company, how do private equity firms typically address any post-closing recourse for the benefit of a strategic or private equity acquirer?
There are limitations depending on the type of portfolio company. For example, there are regulatory requirements with regards to certain types of companies such as brokerage firms and insurance firms. In addition, a change of entity itself might be a prerequisite for taking the company public. For non-listed entities, restrictions of sale might be present under the portfolio company’s articles of association. Generally, for a conduct of an IPO, a company would need to obtain the approval of an extraordinary general assembly (typically representing 66 per cent of the shares represented at the meeting) of the listing, in addition to other regulations. There are also post-IPO restrictions on the disposal of shares.Portfolio company IPOs
What governance rights and other shareholders’ rights and restrictions typically survive an IPO? What types of lock-up restrictions typically apply in connection with an IPO? What are common methods for private equity sponsors to dispose of their stock in a portfolio company following its IPO?
Governance and shareholder rights may survive following an IPO to the extent that they are included in the target’s articles of association. Other shareholder rights, which are not included in the articles (such as call and put options and tag-along and drag-along rights) may continue to survive contractually. Restrictions on the sale of shares will in all cases have to be removed prior to the IPO. Disposal of shares following the IPO is required to be done through the stock exchange using its regular mechanisms or through an offer to sell shares that is supervised by the regulator.Target companies and industries
What types of companies or industries have typically been the targets of going-private transactions? Has there been any change in industry focus in recent years? Do industry-specific regulatory schemes limit the potential targets of private equity firms?
Most PE transactions in Egypt occur in the food, healthcare, education, fast-moving consumer goods, real estate and tourism sectors. The focus on education, whether secondary or higher education, has been an emerging trend, and in 2018 EFG Hermes Private Equity acquired four international schools in Egypt for US$56 million. In addition, 2018 witnessed an increased activity in PE markets with relation to tourism. In April 2018, the Ministry of Tourism announced the relaunching of the Papyrus Private Equity Tourism fund, and in November it announced its plans for a new PE fund to upgrade Egypt’s hotels and other travel-related infrastructure.