Liberaliseringen af selvfinansieringsforbuddet: Og betydningen heraf for kapitalfondes virksomhedsopkøb

Katja Nordentoft

Student thesis: Master thesis

Abstract

The pass of the new Danish Company’s Act has resulted in a liberalization of the former prohibition on financial assistance during the purchase of a company’s own shares. Therefore it is now legal, when certain conditions are met, for a company to finance its own takeover by granting the purchaser a loan, provide security or advance funds. Private equity funds are notorious of their way of post financing their takeovers through large dividend payments after the acquisition. The alternative given through the legalization of financial assistance when purchasing shares raises the question of how this will influence private equity takeovers. The main concern of this thesis is therefore to analyze the content of the provision on financial assistance and to examine how private equity funds will apply this alternative source of financing in connection with their takeovers. The thesis indicates that financial assistance will apply in some takeover-situations, but that the private equity funds will not benefit largely on the new alternative. Financial assistance will primarily substitute for external financing, and will in those cases contribute positively to society. In some situations private equity funds might substitute financial assistance for equity, in hope of enlarging their profits. Taking the market conditions into consideration it is probably not likely that banks will grant loans for such riskier deals. But maybe in the long run takeovers with a higher leverage will occur in effect of the possibility of financial assistance. The riskier finance of such takeovers will cause a higher bankruptcy-rate and will probably have a negative effect on society. Though, when the market conditions are taken into consideration, financial assistance may contribute to raising capital enough to carry out beneficial takeovers which would not have been launched under the current market conditions. When this is the case, society too will benefit from the use of financial assistance.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2010
Number of pages91