Private M&A Comparative Guide

1 Deal structure

1.1 How are private M&A transactions typically structured in your jurisdiction?

Private M&A transactions are typically structured as either a share deal or an asset deal. In a share deal, the buyer acquires all or part of the target's share capital, thereby indirectly taking ownership of its assets, liabilities and contractual relationships. In an asset deal, the buyer directly acquires specific assets and rights. Depending on the nature of the transaction, an asset deal may qualify as a transfer of a business as a going concern, in which case specific mandatory rules apply.

In limited cases, mergers – whether by absorption or through the creation of a new company – can serve as a method of acquiring companies.

1.2 What are the key differences and potential advantages and disadvantages of the various structures?

In a share deal, since the legal entity remains unchanged, contracts, licences and relationships continue without requiring third-party consent (except where change-of-control clauses apply). However, the buyer assumes all past, present and future liabilities, including:

• tax risks;
• employee claims; and
• legal disputes.

These risks, however, are typically mitigated through representations and warranties (R&W) in the share purchase agreement (SPA).

An asset purchase allows the buyer to acquire specific assets while avoiding unwanted liabilities, making it a preferred structure when the target has identified legal risks. This approach offers flexibility in selecting assets and liabilities, but it often requires third-party consents and detailed contractual arrangements to define the scope of the transaction, which might be burdensome (see section 1.3). Still, the acquired assets may be covered by specific and limited R&W negotiated as part of an asset purchase agreement (APA) to grant the buyer quiet enjoyment of those assets, specifically in relation to industrial or IP assets. However, depending on the structure, certain legal risks cannot be excluded, such as employee claims should the deal entail the transfer of employees. Furthermore, the transfer tax under an asset deal is significantly higher than under a share deal (see question 13.1).

Mergers can be an efficient way to streamline group structures or integrate businesses, sometimes without requiring unanimous shareholder approval. However, they can be complex and costly, as they involve the automatic transfer of all assets and liabilities of the absorbed company to the merging entity (or to the newly created company). Some contracts may terminate upon the merger, requiring prior consent from third parties to ensure continuity.

1.3 What factors commonly influence the choice of transaction structure?

The choice of transaction structure is primarily driven by strategic and commercial considerations, taking into account:

• the buyer's objectives;
• industry dynamics; and
• the specific characteristics of the target, as revealed through due diligence.

Share purchases are the most common form of acquisition in France, as they:

• allow for a straightforward transfer of ownership, including both assets and liabilities; and
• are generally more cost-effective from a tax perspective.

This structure avoids the need to individually transfer contracts, permits and assets, making the process more efficient.

By contrast, an asset deal provides greater flexibility, as the buyer can cherry-pick which assets to acquire while excluding unwanted elements and liabilities. However, this flexibility comes with additional complexity. The transfer process requires careful identification of the assets and liabilities in the asset transfer agreement, which must be mutually agreed upon by both parties. Additionally, certain assets, such as contracts or permits, may require third-party consent, adding to the transaction's complexity. Generally, the larger the target, the less attractive an asset deal becomes compared to a share deal. Consequently, share deals are typically preferred for larger transactions, where operational efficiency and legal certainty are key considerations.

Mergers and contributions are primarily used for internal reorganisations or strategic combinations, such as consolidations between companies or business units. These structures enable the automatic transfer of assets and liabilities by operation of law, often offering corporate, tax or operational benefits. As a result, they are typically employed as a second-step transaction following a share deal, allowing for the post-acquisition reorganisation of the corporate structure to enhance efficiency and integration.

1.4 What specific considerations should be borne in mind where the sale is structured as an auction process?

In an open-bid process with multiple bidders, the seller's investment bank typically drives the process:

• structuring the deal;
• coordinating bids through process letters; and
• assisting in negotiations.

The scope and structure of the deal are usually non-negotiable, and transactional document negotiations (SPA, R&W) are limited and expedited to secure the best offer quickly – typically favouring:

• the highest price;
• the best financing; and
• minimal conditions precedent.

Anticipation and organisation are key in such processes. Bidders first sign a non-disclosure agreement to receive limited financial information before submitting an initial non-binding offer (NBO). The NBO includes:

• an initial valuation subject to further due diligence; and
• the main transaction conditions, ideally limited to essential aspects such as financial, competition or regulatory approvals.

Based on the NBO, the bidder may be selected to proceed and granted data room access to conduct due diligence before submitting a binding offer (BO). The due diligence period is typically short, but in some cases, the seller provides vendor due diligence reports, offering an initial assessment of key risks. To enhance efficiency, the review may be limited in scope – for example:

• focusing on specific companies or jurisdictions in multi-entity transactions;
• applying materiality thresholds to risk assessments;
• prioritising red-flag issues; or
• conducting a targeted review of vendor due diligence reports instead of a full data room review.

These approaches help bidders to streamline their analysis while maintaining a competitive position in the process.

A draft SPA or APA is uploaded to the data room shortly before the BO deadline, allowing bidders to submit carefully considered comments to maximise their selection chances.

2 Initial steps

2.1 What agreements are typically entered into during the initial preparatory stage of a private M&A transaction?

Typically, during the initial preparatory phase of an M&A transaction, several key documents are executed, including:

• a non-disclosure agreement (often granting access to a teaser, an information memorandum or some early limited information);
• a non-binding offer;
• a memorandum of understanding or letter of intent (which generally provides access to a proper data room and can include an exclusivity provision for a limited duration granted to the potential purchaser); and
• a binding offer (upon which employees and the works council are generally informed and consulted).

2.2 Which advisers and stakeholders are typically involved in the initial preparatory stage of a private M&A transaction?

Several key advisers are involved in the initial preparatory phase of an M&A transaction, each contributing to the successful execution of the deal by providing expertise in their respective fields:

• M&A advisers play a crucial role for both buyers and sellers. On the sell side, they assist in:
• • preparing the company for sale;
  • conducting valuations; and
  • drafting the information memorandum.
• On the buy side, they help to:
• • identify suitable targets;
  • coordinate acquisition audits; and
  • advise on financial, legal and tax structuring.
• Investment banks may also be involved, particularly in competitive processes, where they assist with:
• • deal negotiation;
  • financing strategies; and
  • market positioning.
• Lawyers are essential to the transaction:
• • handling negotiations;
  • drafting and reviewing legal documentation; and
  • conducting due diligence.
• They:
• • advise on the structuring of the deal;
  • assist in setting up acquisition vehicles when necessary;
  • ensure compliance with all applicable legal frameworks and regulatory; and
  • help to mitigate legal risks.
• Certified public accountants, statutory auditors and financial advisers may be engaged to:
• • perform financial audits;
  • issue certifications; or
  • conduct limited reviews of the target's accounts.
• Notaries are required in transactions involving real estate assets or certain industrial facilities, ensuring:
• • the legal transfer of property; and
  • compliance with formal requirements.
• Specialised experts provide due diligence in key areas depending on the industry and the specifics of the target business. These may include:
• • environmental consultants;
  • health and safety specialists; and
  • technical and operational experts.

2.3 Can the seller pay adviser costs or is this limited by rules against financial assistance or similar?

Under French law, the rule against financial assistance, as set out in the Commercial Code, prohibits a company from:

• advancing funds;
• granting loans; or
• providing security for the acquisition of its own shares by a third party.

This restriction applies specifically to the target, not the seller. However, it does not encompass adviser costs as such.

More broadly, the rule is that any payment made by the target:

• must align with its corporate interest; and
• must not serve as an indirect means of financing the buyer's acquisition.

Accordingly, the target may pay adviser costs if they are justified by its own corporate interest. Such expenses may include:

• assessing the transaction's impact on the target;
• ensuring regulatory compliance; or
• negotiating transaction terms that directly affect the target.

Conversely, fees that exclusively benefit the buyer – such as due diligence costs or acquisition structuring fees – may be considered a misuse of corporate assets, potentially exposing the target's officers to civil and criminal liability.

3 Due diligence

3.1 What due diligence is typically conducted in private M&A transactions in your jurisdiction and how is it typically conducted?

Legal due diligence typically covers:

• shareholding;
• corporate governance;
• key financial agreements;
• commercial contracts;
• labour and employment;
• tax;
• IP/IT/data protection;
• regulatory compliance; and
• litigation.

The parties generally rely on their legal counsel to conduct these reviews.

For transactions involving real estate or manufacturing facilities, a notary may be required; and specialists may be appointed for environmental, health and safety, technical or financial assessments. Given growing environmental, social and governance (ESG) concerns, the involvement of ESG advisers is increasingly common.

The buyer usually sends the seller a due diligence request list detailing the information and documents required, which are typically shared in an electronic data room. The review process is followed by Q&A sessions and, where necessary, meetings with management or experts to address specific concerns.

The findings are summarised in a due diligence report, which may be either:

• a full report, providing a detailed analysis of reviewed materials; or
• a red-flag report, highlighting key risks that could impact the transaction, based on materiality thresholds or the buyer's instructions.

Due diligence reports are strictly confidential and may not be shared, copied or referenced without the express prior written consent of the auditors. If the buyer needs to disclose the report to third parties, such as a bank financing the transaction, release letters – and less frequently, reliance letters – may be negotiated to define the scope of permissible reliance.

3.2 What key concerns and considerations should participants in private M&A transactions bear in mind in relation to due diligence?

On the seller's side, confidentiality is paramount. Before sharing any information or documents with the buyer, the seller must ensure the execution of a robust non-disclosure agreement. Additionally, sensitive commercial or strategic information – particularly those subject to competition regulations – should be placed in restricted-access sections of the data room. Access to such information should be limited to specific individuals under the terms of a 'clean-team agreement', ensuring compliance with regulatory requirements while protecting the seller's business interests.

On the buyer's side, during due diligence, the buyer and its advisers must anticipate the forthcoming negotiation of representations and warranties (R&W). The extent to which the data room disclosures and provided information exempt the seller from liability will directly impact the scope of R&W. If specific risks are identified, the buyer may negotiate tailored R&W to address those concerns.

Additionally, the level of risk exposure uncovered during due diligence will shape key financial aspects of the R&W, including:

• unit thresholds;
• aggregate thresholds;
• deductibles; and
• caps.

From a broader perspective, good-faith principles apply, requiring a minimum level of disclosure to:

• ensure that the buyer provides informed consent; and
• mitigate potential post-closing disputes.

3.3 What kind of scope in relation to environmental, social and governance matters is typical in private M&A transactions?

In private M&A transactions, the scope of environmental, social and governance (ESG) due diligence is increasingly significant. The key objective is to:

• identify ESG-related risks;
• assess regulatory compliance; and
• evaluate the sustainability commitments of the target.

The review typically includes an assessment of the target's corporate ESG principles, covering:

• sustainability reporting;
• adherence to international standards;
• resource efficiency;
• employee rights;
• work safety audits;
• climate policies; and
• corporate codes of conduct.

The implementation of these policies across jurisdictions and operational activities is also examined to determine the company's sustainability level and positioning.

Benchmarking against industry peers and best practices is a common approach to assess the target's ESG efficiency. This often involves evaluating ESG performance against comparable entities, with a focus on strategic, regulatory and market risks.

Another key aspect is verifying compliance with national laws and international ESG frameworks. The assessment also considers forthcoming EU regulations and their potential impact on the target's ESG obligations.

Finally, ESG due diligence aims to quantify potential financial and operational risks associated with:

• ESG compliance gaps;
• regulatory changes; or
• reputational concerns.

4 Corporate and regulatory approvals

4.1 What kinds of corporate and regulatory approvals must be obtained for a private M&A transaction in your jurisdiction?

Certain approvals required in M&A transactions are contractual, while others are statutory.

In private M&A transactions, most bylaws and shareholders' agreements impose internal approval requirements, such as:

• pre-emptive rights;
• tag-along clauses; and
• drag-along clauses.

Additionally, change of control provisions in key contracts – particularly financial agreements – may be triggered and require clearance before completion.

Employee involvement may also be required. In France, any entity with more than 50 employees and a social and economic committee (CSE) must inform and consult the CSE, obtaining its advisory opinion before signing any binding agreement. For small and medium-sized enterprises with fewer than 250 employees, employees must be informed of any contemplated transfer of the company, its business or a majority stake. While employees may submit an offer to acquire the business, they do not have pre-emption or priority rights (see question 10).

Finally, certain transactions require prior clearance from regulatory authorities, including:

• the French Competition Authority or, for larger deals, the European Commission, under competition regulations;
• the Autorité de Contrôle Prudentiel et de Résolution for transactions in the banking and insurance sectors; or
• the minister of economy, under the French Foreign Direct Investment Regulation (FFIR), for deals involving strategic sectors.

Each of these approvals can impact timing and feasibility, requiring careful planning and anticipation.

4.2 Do any foreign ownership restrictions apply in your jurisdiction?

As a general rule, financial relationships between France and foreign countries are unrestricted and encouraged, subject to certain regulatory constraints, including:

• the FFIR;
• the EU Foreign Subsidies Regulation; and
• the EU sanctions regime.

The FFIR is designed to protect public order, national security and France's strategic interests, ensuring the country's independence in sensitive sectors. In a nutshell, under the FFIR, the acquisition by certain foreign investors of the control of a French entity, of a branch, an establishment, all or part of a business activity of an entity governed by French laws, or in some cases a shareholding in a French entity operating in sensitives sectors may require the prior approval from the minister of economy. Failure to obtain the necessary authorisation, where required, can have serious consequences, including the risk of the transaction being declared null and void.

Additionally, certain sector-specific regulations may restrict or prohibit foreign investors from controlling French companies in regulated industries, such as the press industry. Some sectors, such as banking and insurance, require prior approval from sectoral regulatory authorities before a foreign investor can acquire control.

4.3 What other key concerns and considerations should participants in private M&A transactions bear in mind in relation to consents and approvals?

At the EU level, EU Regulation 2019/452 established a cooperation framework for foreign direct investment (FDI) screening, fostering collaboration among member states. This mechanism allows member states to:

• exchange information on specific FDIs; and
• assist each other in assessing potential risks.

Additionally, the European Commission has the authority to issue consultative opinions on FDIs that may impact:

• security;
• public order; or
• strategic EU projects or programmes.

The commission publishes an annual report on the regulation's implementation and its impact.

Furthermore, under the EU Foreign Subsidies Regulation, certain M&A transactions must be notified to the European Commission when:

• they involve targets, merging entities or joint ventures that generate a turnover in the European Union of at least €500 million; and
• such involved parties have benefited from foreign financial contributions exceeding €50 million in the last three years.

Such transactions cannot be completed pending review of the European Commission.

Lastly, atypical entities, such as agricultural cooperatives or government-owned companies, may be subject to additional sector-specific regulations that impact M&A transactions.

5 Transaction documents

5.1 What documents are typically prepared for a private M&A transaction and who generally drafts them?

As part of the preparatory steps for a private M&A transaction, please refer to question 2.

During the transactional phase, the main agreements typically include:

• a share purchase agreement (SPA) or asset purchase agreement (APA), generally incorporating representations and warranties (R&W);
• where applicable, a shareholders' agreement and a transitional services agreement (TSA); and
• employee incentive documents, if relevant to the transaction.

Both parties generally rely on legal counsel for the negotiation and drafting of these agreements. In an open-bid process, the seller's lawyers usually prepare the initial drafts of transactional documents. Conversely, in a mutually negotiated transaction, the buyer's lawyers typically take the lead in drafting the agreements.

5.2 What key matters are covered in these documents?

Each transactional document serves a specific purpose, covering distinct aspects of the transaction:

• SPA/APA: This agreement outlines all steps and actions from signing to closing and includes post-closing obligations. The key provisions typically address:
• • purchase price mechanics, including adjustments and payment terms;
  • R&W, along with the corresponding indemnification mechanism; and
  • post-closing covenants, such as non-compete and non-solicitation obligations imposed on the seller.
• TSA: This agreement is often essential to ensure an operational handover of the target. It allows the buyer to benefit, for a limited period, from certain services provided by the seller. TSAs typically focus on IT infrastructure and systems, ensuring business continuity during the transition.
• Employee incentive documents: These documents help the buyer retain key employees by providing incentives to ensure their commitment to the target's continued operations and development post-transaction. Retention measures may include bonus plans, equity participation or other tailored incentive schemes designed to align employee interests with the buyer's strategic goals.

5.3 On what basis is it decided which law will govern the relevant transaction documents?

Subject to limited public policy restrictions, including regarding rules governing the transfer of title to the shares, parties are generally free to submit the transaction to foreign laws, including in cases where a French transaction forms part of a global deal spanning multiple jurisdictions.

However, if the transaction is a standalone deal conducted in France and involves a French target, it is common practice to grant jurisdiction to French courts. Opting for a foreign jurisdiction in such cases may prove burdensome, as resolving disputes under a legal framework with no substantial connection to the transaction could lead to:

• procedural inefficiencies;
• increased costs; and
• enforcement challenges.

6 Representations and warranties

6.1 What representations and warranties are typically included in the transaction documents and what do they typically cover?

Representations and warranties (R&W) typically fall into three categories:

• Fundamental R&W cover essential aspects of the transaction, such as:
• • the seller's legal capacity to enter into the agreement;
  • the ownership and transferability of the shares;
  • the absence of encumbrance; and
  • the valid existence and proper organisation of the target.
• General warranties typically encompass all customary representations concerning the target's business, financial position and legal compliance. They cover matters such as:
• • financial statements;
  • assets;
  • liabilities;
  • tax compliance;
  • material contracts;
  • real estate;
  • employment matters;
  • IP rights;
  • environmental issues;
  • product liability;
  • insurance; and
  • ongoing litigation.
• In some cases, key representations from this category may be elevated to fundamental warranties, depending on their importance to the transaction.
• Specific warranties are tailored to serious risks identified during the due diligence process. These warranties provide protection against known exposures, such as:
• • regulatory non-compliance;
  • pending disputes;
  • contingent liabilities; or
  • other material identified concerns specific to the target.

If a representation or warranty is found to be inaccurate after closing, the buyer may seek indemnification, typically through price adjustments.

6.2 What are the typical circumstances in which the buyer may seek a specific indemnity in the transaction documentation?

Typically, the buyer may seek specific indemnities when material risks (eg, tax or environmental matters) are identified during due diligence. These indemnities become particularly crucial when data room disclosures or disclosure schedules to the share purchase agreement (SPA) would otherwise exempt the seller from liability under the general R&W. In such cases, specific representations, warranties and indemnities are structured as exceptions to the general R&W framework and may include customised terms – such as specific duration limits, financial caps or dedicated escrow mechanisms – to mitigate identified risks.

6.3 What remedies are available in case of breach and what is the statutory timeframe for bringing a claim? How do these timeframes differ from the market standard position in your jurisdiction?

In the event of a breach of R&W by the seller, indemnification is typically the primary – and often exclusive – remedy available to the buyer, except in case of fraud or wilful misconduct. This indemnification mechanism is a contractually negotiated provision in the share purchase agreement (SPA) or asset purchase agreement (APA), designed to compensate the buyer for any loss or damage resulting from the breach.

The timeframe for bringing a claim is also negotiated by the parties and specified in the SPA/APA. This timeframe may be shorter than or aligned with the applicable statutory limitation periods, depending on the nature of the warranties and market practice.

6.4 What limitations to liability under the transaction documents (including for representations, warranties and specific indemnities) typically apply?

Financial limitations: The seller's liability under R&W is generally capped at 10% to 30% of the purchase price, except for fundamental and specific warranties, which may have a higher cap – sometimes up to 100% of the purchase price. This ensures that, except in cases of fraud or wilful misconduct, the seller's liability remains within predefined limits.

Indemnification is also subject to basket provisions, meaning that claims must reach a minimum threshold before the seller is liable. If total claims fall below this threshold, no indemnification is owed. Two common baskets are:

• tipping baskets (or threshold), where once the basket is exceeded, the seller is liable for the full amount; and
• non-tipping baskets (or deductible), where the seller is only liable for losses above the basket.

Additionally, de minimis provisions may prevent claims below a specific amount.

Disclosure: Sellers can limit liability by disclosing relevant risks in the disclosure schedule of the purchase agreement, preventing the buyer from claiming indemnification for known issues. In some cases, data room disclosures may also be deemed sufficient, provided that the information was fair and apparent.

Time limitations: General R&W typically survive for 18 to 36 months post-closing, whereas fundamental and specific warranties generally remain in effect for the duration of the statutory limitation period applicable to the underlying risk.

Miscellaneous limitations and exclusions: Additional limitations or exclusions may apply to ensure fairness of the warranties, such as:

• acknowledging information publicly available before closing at disclosed for all purposes under the warranties; or
• excluding liability if a representation becomes inaccurate based on mandatory post-closing changes in accounting or tax policies.

6.5 What are the trends observed in respect of buyers seeking to obtain warranty and indemnity insurance in your jurisdiction?

Warranty and indemnity (W&I) insurance has become increasingly common in French M&A transactions and can be taken out by either the seller or the buyer. Its prevalence is closely linked to transaction size, with larger deals more frequently involving W&I insurance. However, its use is also growing in mid-market transactions, reflecting a broader market adoption. This trend is expected to continue, driven by evolving deal structures and risk allocation preferences.

6.6 What is the usual approach taken in your jurisdiction to ensure that a seller has sufficient substance to meet any claims by a buyer?

In French M&A practice, R&W are typically secured by one of the following methods:

• Bank guarantee: A bank provides a guarantee to cover the seller's potential liability under the R&W.
• Seller's parent guarantee: The seller's parent company issues a guarantee to secure the seller's obligations in case of warranty breaches.
• Deferred payment of the purchase price ('retention'): The buyer withholds a portion of the purchase price for a defined period, which can be used to cover any warranty claims. This mechanism is infrequent as overly favourable to the purchaser.
• Escrow account: A portion of the purchase price is deposited into an escrow account, held for a specified period. Any warranty claims are offset against the escrowed amount.
• W&I insurance: W&I insurance provides coverage for warranty breaches, allowing the buyer to seek recourse against the insurer rather than the seller.

The bank guarantee and the escrow accounts are the most commonly used mechanisms in France to secure the seller's obligations, although W&I insurance is strongly gaining traction.

6.7 Do sellers in your jurisdiction often include restrictive covenants in the transaction documents? What timeframes are generally thought to be enforceable?

Restrictive covenants are commonly used in M&A transactions, with the most prevalent being:

• confidentiality clauses;
• non-compete clauses; and
• non-solicitation clauses.

A confidentiality clause is a common and essential feature in sale and purchase agreements. French courts tend to be more lenient regarding the scope and duration of confidentiality clauses compared to other restrictive covenants. This is because confidentiality is considered crucial to protecting:

• the integrity of the transaction; and
• the parties' sensitive information.

To be effective, non-compete and non-solicitation clauses must be reasonable and proportionate in terms of:

• time;
• geographic scope; and
• business activities.

French courts closely scrutinise such clauses to ensure they do not impose unreasonable restrictions on competition or infringe upon the seller's rights. Typically, to be considered valid, these covenants should be:

• limited to a duration of one to three years; and
• narrowly defined in both territory and business scope.

If the seller is an employee of the target or becomes an employee upon closing, French labour law imposes additional restrictions on non-compete clauses, including a requirement to provide financial compensation as consideration for the non-compete commitment. Failure to comply with such requirements may render the non-compete clause unenforceable.

6.8 Where there is a gap between signing and closing, is it common to include conditions to closing, such as no material adverse change (MAC) and bring-down of warranties?

Yes, conditions to closing are usual in a situation where there is a gap between signing and closing, including bring-down of warranties and MAC.

Bring-down of warranties is a standard provision in M&A transactions, requiring the seller's R&W to remain accurate at closing, as they were at signing. On the other hand, MAC clauses are typically subject to intense negotiation, especially when there is a significant gap between signing and closing. Buyers often insist on including a MAC clause to protect against unforeseen events that could materially impact the target's value during this period. Sellers, however, typically seek to limit the scope of the MAC clause by negotiating exemptions for events beyond their control, such as:

• macroeconomic changes;
• industry-wide impacts; or
• natural disasters.

Refusing a MAC clause outright is generally challenging when the time between signing and closing is substantial, as buyers view this protection as essential.

Ultimately, the outcome depends on the relative negotiating power of the parties, with stronger sellers often succeeding in narrowing the clause's scope, while buyers in a position of strength may achieve broader MAC protection.

6.9 What other conditions precedent are typically included in the transaction documents?

The transaction documents necessarily include clearance from relevant regulatory authorities as a condition precedent to completion. Additional conditions precedent are typically identified during due diligence and may include third-party approvals from key customers, suppliers or financial partners – particularly when the transaction triggers change of control clauses or early repayment provisions in material agreements.

7 Financing

7.1 What types of consideration are typically offered in private M&A transactions in your jurisdiction?

In private M&A transactions, parties are generally free to negotiate the deal terms and purchase price, provided that they comply with mandatory legal requirements. The most common forms of consideration include cash and consideration in kind, such as shares of the buyer.

7.2 What are the key differences and potential advantages and disadvantages of the various types of consideration?

Consideration in kind – typically shares – requires a thorough valuation of the buyer's shares and overall financial standing. This often requires the appointment of ad hoc auditors or independent experts to assess the buyer's value accurately. While this structure allows the buyer to avoid an immediate cash outlay, it poses risks for the seller, as the future value of the consideration is subject to market fluctuations. The seller may need to negotiate liquidity rights to ensure a means of exiting the investment. Furthermore, retaining the seller as a shareholder in the buyer's structure may introduce constraints, particularly if disputes arise over representations and warranties (R&W) claims.

7.3 What factors commonly influence the choice of consideration?

The choice between cash and consideration in kind is often influenced by the seller's ongoing involvement in the target or the buyer's group post-transaction. If the seller remains engaged in the business, consideration in kind can serve as an incentive, aligning their financial interests with the long-term success of the acquisition.

Tax considerations also play a crucial role. A cash consideration typically does not offer the seller the same possibilities of obtaining tax-neutral treatment for the transaction as payment in shares; it may also have different consequences for the buyer.

7.4 How is the price mechanism typically agreed between the seller and the buyer? Is a locked-box structure or completion accounts structure more common?

The price mechanism is negotiable and influenced by factors such as:

• the seller's nature (industrial or financial investor); and
• the target's business model.

Industrial sellers often prefer a completion accounts mechanism, where the final purchase price is determined based on financial accounts prepared at closing. Conversely, financial sellers typically favour a locked-box structure, which provides price certainty by setting the purchase price as of a historical reference date.

Where the target's business is seasonal or cash-flow intensive, a completion accounts structure is often preferred, ensuring the seller captures the economic benefits generated up to closing.

7.5 Is the price typically paid in full on closing or are deferred payment arrangements common?

The payment structure is a matter of negotiation. When parties agree on a fixed and final price, the full purchase price is typically paid at closing, with ownership transfer occurring upon the seller's receipt of funds.

In completion accounts structures, deferred payment arrangements are common. Additionally, sellers may provide financing through a vendor loan, allowing the buyer to pay part of the purchase price in instalments.

Earn-out payments may also be used, where a portion of the price is contingent on the target meeting specific financial or operational targets post-closing.

7.6 Where a deferred payment/earn-out payment is used, what typical protections are sought by sellers (eg, post-completion veto rights)?

Where the parties adopt a completion accounts structure, they may negotiate various mechanisms to secure the final purchase price determination. These may include:

• an initial partial payment of an estimated price at closing;
• holding of the remaining portion of the estimated price in escrow or retention by the buyer; and
• a subsequent price adjustment mechanism to finalise the purchase price once the completion accounts are established.

In all cases, the seller may require the buyer to provide commitment letters before closing, confirming that the necessary funds are secured and available, particularly when third-party financing is involved.

In the event of a vendor loan, the seller may negotiate specific covenants in the share or asset purchase agreement to protect its financial interest. These covenants may ensure, for instance, that:

• there is no leakage of cash to the benefit of the buyer's group members, as seen in a locked-box mechanism; and
• the buyer's legal representatives or shareholders do not take any significant actions that could jeopardise the buyer's solvency before full repayment of the vendor loan.

Additionally, the seller may require a specific guarantee, such as a pledge over the target's shares held by the buyer, up to the amount of the vendor loan.

In the case of an earn-out mechanism, the share or asset purchase agreement may include set-off provisions allowing the seller to offset any amount it owes the buyer under the earn-out mechanism against any amount the buyer owes the seller under the R&W and indemnification framework.

7.7 Do any rules on financial assistance apply in your jurisdiction, and what are their implications for private M&A transactions?

Please see question 2.3 for the general rule on prohibited financial assistance. When the buyer relies on external financing to fund the purchase price, this rule prohibits the target (or its group entities) from providing any guarantee or security interest over their assets in favour of such financing.

As a result, the buyer typically provides guarantees or security interests over its own assets, including the target's shares, to secure the transaction financing. In some cases, downstream guarantees may also be used if necessary. Additionally, capitalisation rules and banking regulations impose further restrictions on debt financing structures, ensuring compliance with regulatory requirements.

7.8 What other key concerns and considerations should participants in private M&A transactions bear in mind from a financing perspective?

In certain cases, parties may consider offering different prices to different types of sellers. However, they must keep in mind that all sellers transferring the same class of securities should, as a general rule, receive the same price per share. Exceptions may apply in limited circumstances, such as where a different price is justified based on a seller's status (majority versus minority shareholder) or where specific commitments, such as R&W obligations, are undertaken by certain shareholders but not others.

Additionally, increasing attention must be given to compliance with hard and soft laws related to anti-money laundering and counter-terrorist financing. These regulations impose enhanced due diligence obligations, requiring careful monitoring of funding sources and transaction participants.

Finally, the legal representatives of a company are subject to a duty of loyalty, which prohibits them from engaging in self-dealing or opportunistic transactions. For instance, they cannot acquire shares at a lower price while possessing inside knowledge of a forthcoming transaction at a higher price, as such conduct may constitute a breach of fiduciary duties or market abuse under French law.

8 Deal process

8.1 How does the deal process typically unfold? What are the key milestones?

The deal process varies depending on several factors – primarily whether the transaction is conducted as a competitive process or an over-the-counter (OTC) transaction:

• In a competitive process, the seller's investment bank plays a central role in structuring and managing the transaction, ensuring a swift and organised bidding process. This involves multiple bidding rounds and a structured selection process. (For further details on competitive processes, please refer to question 1.4.)
• An OTC transaction is based solely on the mutual agreement of the parties, offering greater flexibility but often requiring longer negotiation periods.

Regardless of the process, the main private M&A documents and milestones remain largely the same. In a competitive process, additional elements such as process letters and bidder selection phases may be involved. However, both transaction types generally include:

• a non-disclosure agreement (providing access to teasers or information memoranda);
• a non-binding offer (NBO) (granting access to the data room); and
• a binding offer (BO).

At this stage, employees and the social and economic committee (CSE) must be informed or consulted. The final transaction documents typically include:

• share purchase agreements or asset purchase agreements – which commonly incorporate representations and warranties (R&W);
• shareholders' agreements;
• transitional services agreements; and
• employee incentive documents.

The key milestones in a private M&A transaction include:

• submission of the NBO;
• completion of due diligence reviews;
• submission of the BO (where relevant);
• negotiation and drafting of the transactional documents;
• obtainment of the necessary approvals prior to signing (eg, CSE consultation and employee notification – see question 4.1);
• satisfaction of conditions precedent, including regulatory approvals and clearances (see question 6.9); and
• final completion of the transaction.

The timeline for completion depends on the complexity and structure of the deal. When there are no conditions precedent, signing and closing may occur on the same day, following a short negotiation phase. However, in more structured transactions involving extensive due diligence and regulatory approvals, such as merger control clearance, the process typically takes six to nine months.

Finally, it is essential to consider employee rights, as their information and consultation procedures can introduce additional delays in the completion timeline.

8.2 What documents are typically signed on closing? How does this typically take place?

On the closing date, the parties execute the necessary corporate documentation to formally consummate the transaction and transfer ownership of the target from the seller to the buyer. In the case of a limited liability company (société par actions), this typically includes:

• share transfer forms and tax transfer forms, ensuring:
• • proper registration; and
  • compliance with tax obligations;
• corporate documentation at the target level, reflecting the buyer's new ownership. This may include:
• • resolutions appointing new legal representatives;
  • changes to the company's name or registered office; and
  • where applicable, amendments to the target's bylaws to align with the buyer's group governance structure;
• ancillary agreements, such as:
• • transitional services agreements; or
  • any other agreements required to ensure a smooth post-closing transition; and
• other documents specifically agreed upon by the parties, considering the unique characteristics of the transaction.

Since the post-COVID-19 period, there has been a strong shift towards electronic signatures, in line with applicable legal frameworks, to streamline and expedite the closing process while facilitating the remote execution of documents.

8.3 In case of a share deal, what is the process for transferring title to shares to the buyer?

Under French law, the transfer of title to shares to the buyer requires specific corporate formalities, depending on the type of company:

• For shares issued by limited liability companies (sociétés par actions/sociétés de capitaux), the transfer is formalised through a share transfer form. It is essential to update the share transfer register and the shareholder's individual accounts, as these records serve as proof of ownership of the shares.
• For shares issued by unlimited liability companies or partnerships (sociétés de personnes), the transfer is completed by a resolution of the new shareholder acknowledging the transaction. The company's bylaws must then be updated to reflect the new shareholder's identity and the amended bylaws must be filed with the trade and companies registry to ensure legal recognition of the transfer.

8.4 Post-closing, can the seller and/or its advisers be held liable for misleading statements, misrepresentation, omissions or similar?

Following the completion of an M&A transaction, the seller may be held liable on contractual grounds, primarily in cases of breach of contractual obligations, such as:

• non-compete clauses; or
• violations of R&W granted to the buyer.

Additionally, the seller may be held liable on legal grounds, particularly in cases of fraud or wilful misconduct, where contractual limitations on liability typically do not apply.

The seller's advisers may also face professional liability, although this is generally limited. For example, as part of due diligence reviews, it is typically specified that the due diligence report should not be construed as:

• a legal opinion on the transaction; or
• advice on its:
• • appropriateness;
  • commercial soundness;
  • effect; or
  • value.

If the due diligence report is shared with third parties, it is most often done under a release letter rather than a reliance letter, thereby limiting the adviser's exposure.

Finally, advisers to both parties may also be held liable in the event of a breach of their professional obligations, particularly if they fail to adhere to ethical and regulatory standards governing their profession.

8.5 What are the typical post-closing steps that need to be taken into consideration?

Following closing, certain legal and tax filings must be completed to:

• ensure that the transaction is effective towards third parties; or
• comply with regulatory requirements.

Additionally, the parties must carefully oversee the execution of contractual obligations – particularly those related to post-closing price adjustments or earn-out mechanisms – to avoid potential disputes.

More importantly, closing marks the beginning of the integration period, during which the target and its employees become part of the buyer's operational structure. A well-planned integration process is crucial for ensuring business continuity and long-term value creation. The parties should not underestimate the complexities of integration, as it requires strategic coordination across operational, financial and cultural aspects.

This period also presents an opportunity to implement key recommendations from the due diligence review, particularly regarding compliance issues or operational inefficiencies identified during the pre-transaction phase. Addressing such matters early can help to mitigate risks and align the target with the buyer's corporate governance and best practices moving forward.

9 Competition

9.1 What competition rules apply to private M&A transactions in your jurisdiction?

The approval of the French Competition Authority is generally required for an M&A transaction involving a French target if the following cumulative conditions are met:

• The combined global turnover of all parties exceeds €150 million;
• At least two parties each generate more than €50 million in France; and
• The transaction does not fall within the scope of the European Commission (ie, in such case, EU law applies and clearance by the European Commission should be secured).

Specific thresholds apply to French overseas territories and the retail sector.

9.2 What key concerns and considerations should participants in private M&A transactions bear in mind from a competition perspective?

It is crucial to anticipate the potential application of competition control regulations to an M&A transaction, as they:

• may delay the closing date; and
• in the case of large or complex transactions, may affect the scope of the buyer's activities or assets.

If the transaction does not raise significant competition concerns, the Competition Authority may:

• issue an unconditional clearance; or
• impose limited conditions at the conclusion of a Phase 1 review, which must be completed within 25 business days.

However, if competition concerns persist after Phase 1, the authority will initiate an in-depth Phase 2 investigation, lasting up to 65 additional business days. Where the transaction presents substantial antitrust risks, the authority works closely with the parties to identify appropriate remedies. The authority may require the buyer to implement commitments, such as the divestment of certain assets of the buyer or the target group, to ensure market competition is preserved.

Any commitments or injunctions imposed by the authority are legally binding on the parties.

Failure to comply with these commitments may result in severe consequences, including:

• the withdrawal of clearance;
• financial penalties; or
• an order to implement corrective measures under a periodic penalty payment regime.

Proper planning and early assessment of competition risks help to prevent delays and mitigate potential regulatory hurdles.

10 Employment

10.1 What employee consultation rules apply to private M&A transactions in your jurisdiction?

For companies with at least 50 employees, the social and economic committee (CSE) must be consulted before the transaction is completed. The consultation process requires the employer to provide the CSE with all relevant information regarding the transaction and its impact on employees, allowing the CSE to issue a consultative opinion within a specific timeframe. However, in all cases, this consultation must take place before:

• the execution of any binding document; or
• the adoption of a definitive decision concerning the transaction.

For companies with fewer than 50 employees, there is no legal obligation to consult the CSE regarding the transaction. However, providing informal information to employees may be advisable, depending on the company's usual internal practices and corporate culture.

For small and medium-sized enterprises with fewer than 250 employees, employees must be formally informed of any contemplated transfer of:

• the company;
• its business; or
• a majority stake.

While employees have the right to submit an offer to acquire the business, they do not benefit from pre-emption or priority rights, meaning that the seller is under no obligation to accept an employee offer over other potential buyers.

10.2 What transfer rules apply to private M&A transactions in your jurisdiction?

In the context of a share deal, employees remain employed by the purchased company and their employment agreements remain unchanged, as the transaction does not affect the legal entity employing them.

In the context of a merger, employees of the absorbed company are automatically transferred to the absorbing company upon completion of the merger. This transfer occurs by operation of law, meaning that neither the employees nor the employer can oppose it. However, the only permissible modification to the transferred employees' contracts is the change in employer identity – other contractual terms and conditions must remain unchanged.

Particular attention must be paid in cases of a partial sale of a company, such as the sale of specific assets or business activities. In such cases, it is necessary to determine whether the transferred business qualifies as an autonomous economic entity that retains its identity and continues its activity post-transfer. An 'autonomous economic entity' is a self-contained, organised group of people dedicated to a specific activity. It typically includes:

• tangible assets (eg, buildings, land, equipment); and/or
• intangible assets (eg, customers, IP rights).

If these conditions are met, employees assigned to the transferred business are automatically transferred to the buyer under French labour law.

Additional consideration must be given to employees who are simultaneously assigned to both transferred and non-transferred activities. In such cases, their employment contracts may either:

• be transferred to the buyer;
• remain with the seller; or
• be split into two contracts, proportionate to their time allocated to each activity.

Even if the automatic transfer regulation does not apply, collective bargaining agreements must be reviewed, as they may impose additional rules governing employee transfers.

10.3 What other protections do employees enjoy in the case of a private M&A transaction in your jurisdiction?

In the context of a partial sale of a company (involving the transfer of specific assets or business activities), certain employees benefit from special protection under French labour law. These include:

• members of the CSE;
• candidates for a CSE mandate;
• union representatives;
• employees who initiated CSE election procedures;
• employees holding various representation mandates, such as members of the board of a social security fund; and
• former staff representatives who left their mandate less than six months ago also retain this protection.

In such cases, the seller must obtain prior authorisation from the labour administration before transferring these protected employees to the buyer. The labour administration will:

• verify that the automatic transfer regulations apply to the transaction; and
• conduct an individual assessment to ensure that the inclusion of a protected employee in the transfer is not a disguised form of discrimination due to their past or present representative role.

The authorisation request must be submitted to the labour administration at least 15 days before the intended transfer date. The administration has up to two months to issue its decision. If authorisation is denied, this does not:

• affect the transfer of non-protected employees; or
• jeopardise the overall completion of the transaction.

10.4 What is the impact of a private M&A transaction on any pension scheme of the seller?

In the context of a share deal, the transaction has no impact on the pension schemes applicable to the target, as the company itself remains unchanged as the employer of its workforce.

In the context of a merger, two situations must be distinguished:

• Mandatory public pension schemes remain unchanged, as they automatically apply to all employers and are not affected by the transaction.
• Optional and non-public pension schemes, such as those mandated by a collective bargaining agreement, require further analysis:
• • The commitment of the absorbed company to provide a pension scheme to its employees continues post-merger, meaning that employees of the absorbed company retain their rights. Simultaneously, the pension schemes of the absorbing company also become applicable to them, with the most favourable scheme prevailing. However, if the absorbed company's pension scheme was implemented through a company-level collective agreement, its application is limited to a maximum of 15 months after the merger, unless a new collective agreement is negotiated earlier to harmonise pension schemes within the absorbing company.
  • A pension fund contract concluded by the absorbed company does not automatically transfer to the absorbing company unless a specific agreement with the pension fund is reached. The parties must assess whether such a transfer is necessary and negotiate new terms if needed.

10.5 What considerations should be made to ensure there are no concerns over the potential misclassification of employee status for any employee, worker, director, contractor or consultant of the target?

Under French law, the key factor that differentiates an employee from a corporate officer, consultant, freelancer, subcontractor or service provider – and thereby triggers the application of French employment law – is the presence of a 'link of subordination' between the individual and the employer.

This link of subordination, as established by case law, is defined by the employer's authority to:

• give orders and define the employee's tasks and working conditions;
• supervise and control how the work is performed; and
• sanction non-compliance, including issuing:
• • warnings;
  • suspensions; or
  • dismissals.

The determination of subordination is made by labour tribunals, based solely on the actual relationship between the parties, regardless of the contractual terms initially agreed upon. If a link of subordination is established, the relationship will be reclassified as an employment contract, entitling the individual to employee rights and protections under French labour law.

This issue should be thoroughly reviewed as part of the due diligence process to ensure that all individuals engaged by the company are correctly classified. The assessment should consider:

• the job description;
• responsibilities;
• compensation structure; and
• working time arrangements, particularly in relation to applicable collective bargaining agreements.

Failure to properly classify workers may expose the company to significant legal and financial liabilities, including:

• reclassification claims;
• back payment of salaries; and
• social security contributions.

10.6 What other key concerns and considerations should participants in private M&A transactions bear in mind from an employment perspective?

French employment law imposes numerous obligations on employers and liability in this context depends on:

• adherence to these obligations; and
• the ability to provide documentary evidence of compliance.

During due diligence, particular attention should be given to the target's ability to demonstrate compliance, particularly in the following areas:

• working time regulations, including:
• • the work schemes applied to employees; and
  • the monitoring of hours or days worked;
• compensation regulations, covering:
• • minimum wages set by law or collective bargaining agreements;
  • variable remuneration (including eligibility criteria and calculation formulas); and
  • compensation structures benefiting from social security exemptions;
• training regulations, ensuring compliance with mandatory employee training requirements;
• employment contract regulations, assessing the correct classification and use of different contract types (eg, indefinite-term, fixed-term, temporary) and their compliance with statutory provisions;
• staff representation obligations, including:
• • the organisation of CSE elections;
  • the frequency of meetings;
  • proper information and consultation procedures; and
  • adherence to rules governing collective agreements;
• audits and investigations conducted by the labour inspection authorities or social security bodies;
• past collective dismissals for economic reasons and whether they complied with legal requirements; and
• ongoing, past or threatened litigation involving employees and/or unions.

11 Data protection

11.1 What key data protection rules apply to private M&A transactions in your jurisdiction?

In private M&A transactions, data protection is primarily governed by:

• the General Data Protection Regulation (GDPR), which has applied since 25 May 2018; and
• the Data Protection Act of 6 January 1978.

These regulations establish the legal framework for processing personal data in France and are enforced by the Commission Nationale de l'Informatique et des Libertés (CNIL). Compliance with these rules is essential when handling employee, customer or business partner data throughout the transaction process.

11.2 What other key concerns and considerations should participants in private M&A transactions bear in mind from a data protection perspective?

Failure to comply with the GDPR and French data protection laws can result in severe administrative fines:

• Fines of up to €20 million or 4% of total worldwide annual revenue (whichever is higher) may be imposed for violations of fundamental data protection principles, including:
• • unlawful processing;
  • improper handling of sensitive data;
  • failure to respect data subjects' rights; or
  • failure to provide required information to individuals.
• Fines of up to €10 million or 2% of total worldwide annual revenue (whichever is higher) may be levied for non-compliance with general obligations of data controllers, such as failure to:
• • maintain a record of processing activities;
  • cooperate with the CNIL;
  • ensure data security;
  • notify data breaches;
  • conduct impact assessments; or
  • appoint a data protection officer where required.

Beyond administrative penalties, non-compliance may also result in criminal liability under the Penal Code, which can include additional sanctions for companies and individuals involved.

In an M&A transaction, due diligence should include a thorough review of the target's data protection compliance

12 Environment

12.1 Who bears liability for the clean-up of contaminated sites? How is liability apportioned as between the buyer and the seller in case of private M&A transactions?

Under French environmental regulations, the responsibility for the clean-up of contaminated sites lies with the operator of the site – typically at the time it ceases operations or decides to close the site. A private M&A transaction does not, in itself, trigger an obligation to remediate contamination, meaning that the buyer, upon acquiring the target:

• assumes the status of the new operator; and
• becomes responsible for compliance with applicable environmental laws.

If the target operates in an environmentally sensitive industry, environmental risks should be carefully assessed during due diligence. The review should:

• identify any:
• • existing pollution;
  • non-compliance issues; or
  • outstanding regulatory obligations; and
• precisely estimate the costs associated with remediation and compliance.

The allocation of environmental liabilities between the seller and the buyer is typically negotiated in the share purchase agreement and representations and warranties framework. Where significant risks are identified, the parties may agree to specific indemnities or contractual guarantees, such as a dedicated escrow mechanism, to secure the seller's financial contribution to future remediation costs.

12.2 What other key concerns and considerations should participants in private M&A transactions bear in mind from an environmental perspective?

The growing importance of environmental, social and governance (ESG) criteria in investment decisions has made environmental due diligence a key aspect of private M&A transactions. Companies are increasingly subject to hard and soft laws requiring transparency in non-financial performance reporting, including the disclosure of:

• ESG policies;
• action plans; and
• environmental impact metrics.

Beyond compliance, ESG factors influence:

• investment attractiveness;
• corporate reputation; and
• long-term financial stability.

A company's environmental track record and sustainability strategy are now critical in evaluating:

• potential liabilities;
• operational risks; and
• future regulatory exposure.

Buyers should ensure that the target's ESG policies and environmental practices align with evolving regulatory standards and investor expectations.

Failure to properly assess environmental risks may expose the buyer to:

• regulatory penalties;
• unforeseen remediation costs;
• reputational damage; and
• litigation.

As such, environmental and ESG due diligence should be treated as a strategic priority in any M&A transaction.

13 Tax

13.1 What taxes are payable on private M&A transactions in your jurisdiction? Do any exemptions apply?

M&A transactions involve (corporate) income tax and registration duties considerations but are generally neutral from a value-added tax perspective, at least when they involve shares or autonomous businesses.

A sale of shares is only subject to limited registration duties – often 0.1% of the value of the shares, except in the case of mainly real estate investment companies which give rise to:

• 5% registration duties; and
• when the transaction is not passed in France, a confirmatory deed with a notaire.

Listed shares of high capitalisation companies may also trigger a 0.3% tax on financial transactions. By contrast, a sale of assets trigger registration duties of 0% to 5%. Registration duties are usually borne by the buyer.

A sale of shares by a company that is subject to corporate income tax may, subject to minimum holding period and percentage requirements, benefit from the long-term capital gains regime, under which only 12% of the capital gain is effectively subject to tax. By contrast, a sale of business is subject to corporate income tax in full; in addition, it can jeopardise its carry-forward tax losses, if any. For private persons, transactions on shares are now usually subject to:

• the flat tax of 30%; and
• as the case may be:
• • a 3% or 4% contribution on high income; and
  • in 2025, a differential tax on high income

They can be further reduced for sellers who:

• invested in European small and medium-sized before 2018; and
• have held the shares for at least eight years;

When the shares are held in certain types of investment accounts, the capital gain may be:

• fully exempt from income tax; and
• subject only to social contributions of 17.2% when the cash is taken out of the account.

Specific taxation regimes also apply to shares acquired by employees or directors under employee investment schemes (eg, free shares).

Mergers and contributions of businesses remunerated by a share capital increase, however, can generally benefit from a tax neutrality regime, both for registration duties and for corporate income tax purposes, although the impacts on potential tax losses will still need to be assessed. The standard corporate income tax rate is currently 25% (with additional contributions applying above certain thresholds).

13.2 What other strategies are available to participants in a private M&A transaction to minimise their tax exposure?

From a corporate seller's perspective, anticipating the sale of only a branch of a company can prove instrumental. For example, assuming that it qualifies for the favourable tax regime, the branch may in that case be contributed in a neutral tax manner to a newly incorporated company. Provided that the shares issued in consideration for such contributions are then held for at least two years, the eventual sale of these shares can benefit from the long-term capital gains regime described above. This advantage comes in addition to the substantially lower registration duties payable by the buyer. The tax consequences of a M&A transaction may also be limited if the seller:

• has carry-forward tax losses which can, under certain conditions and limitations, be offset against the profit realised on the sale; and/or
• belongs to a tax consolidation group which also has carry-forward tax losses.

For private persons, minimising tax exposure can be achieved – notably, through contributions to another company subject to corporate income tax (subject to anti-abuse rules including drastic reinvestment obligations when this other company is mainly family-owned) or gifting shares prior to the sale.

A buyer may wish to acquire at least 95% of the share capital and voting rights in the target to include it in a tax consolidation group, especially if the acquisition is financed by debt: within such a group, the operational benefits of the target can be compensated with the tax losses resulting from the financial charge incurred by the acquiring company. Financial charges, as well as acquisition and more generally financing costs, are indeed tax deductible, even though dividends or capital gains derived from its investments are mostly tax exempt, subject to:

• anti-hybrid measures;
• thin capitalisation rules; and
• transfer pricing requirements.

Finally, buying companies are frequently activated to allow value-added tax recovery on acquisition costs.

13.3 Is tax consolidation of corporate groups permitted in your jurisdiction? Can group companies transfer losses between each other for tax purposes?

A French company, or the French permanent establishment of a company established in the European Union or the European Economic Area (EEA), may elect for the tax consolidation regime, in which all profits and losses of its 95% owned subsidiaries are consolidated to form one single taxable result, subject to relatively limited adjustments – the Amendement Charasse, which:

• applies when a target is acquired from persons that control the acquisition group; and
• provides for the recapture of part of the group's overall financial charges.

All companies must be subject to corporate income tax in France under the normal regime and have identical 12-month financial years, subject to certain windows during which these financial years may be adjusted. In practice, the target must generally close its current financial year before entering the buyer's tax consolidation group. Since 2015, a 'horizontal' tax consolidation group may also be implemented between French subsidiaries that:

• have the same parent company located in an EU or EEA member state; and
• are subject to a tax equivalent to corporate income tax.

Under the above, the tax losses incurred by members of the tax consolidation group may indeed reduce the group's overall tax burden. However:

• the tax losses incurred by a member company before entering the group may only be offset against the same company's future profits; and
• there can be no transfer of tax losses between member companies of the same tax consolidation group per se, and anti-abuse provisions effectively prevent strategies designed at such a transfer (eg, the sale of assets or subsidies between member companies of the group).

However, tax losses can be transferred from one company to another in the context of reorganisations such as mergers, demergers or contributions of assets. Such transfers are subject to:

• a condition of continuity of the activity in which the losses were incurred (over the period when the losses were incurred and after the reorganisation); and
• except for small amounts, a favourable ruling from the French tax authorities.

13.4 What other key concerns and considerations should participants in private M&A transactions bear in mind from a tax perspective?

The involvement of management and employees in private M&A transactions is often key. Free share plans, stock option plans and, in certain companies, share subscription warrants benefit from tax and social security advantages and are worth considering. Out of these legal plans, decisions held by the French highest courts since 2019 and especially in 2021 on management incentive plans – which ruled that capital gains realised by managers qualify as employment income and are subject to the corresponding taxation rules even when they invested money, at fair market value and at risk, if the gain realised is directly or indirectly linked to the existence or execution of the employment/management contract – have resulted in a new legislation introduced in mid-February 2025 to provide more security and a relatively advantageous regime.

14 Trends and predictions

14.1 How would you describe the current M&A landscape and prevailing trends in your jurisdiction? What significant deals took place in the last 12 months?

Following a period of slowdown, the French M&A market is showing signs of recovery, particularly in the tech sector. In 2024, activity was primarily driven by a small number of large-cap transactions, rather than a high volume of mid-market deals. This reflects a cautious but strategic approach, with buyers focusing on high-value acquisitions to strengthen their market position.

Notable transactions over the past year include:

• BNP Paribas' acquisition of AXA IM, reinforcing its asset management division;
• Lactalis and Sodiaal's purchase of General Mills' North American yogurt business, marking a significant expansion in the US market;
• the acquisition of Altice Media by CMA CGM, demonstrating a strategic diversification move into the media sector by the global shipping giant;
• FDJ's acquisition of Unibet, which positioned the group more strongly in the online gaming sector; and
• Sanofi's contemplated sale of Opella.

These deals illustrate a selective and strategic approach to M&A.

14.2 Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The political instability following the most recent legislative elections has created an uncertain legislative environment in France. With no party holding a clear majority, legislative reforms and regulatory changes in the short term remain difficult to predict. However, areas such as the following remain main key topics of interest and could see developments depending on the political climate:

• foreign investment controls;
• tax reforms; and
• environmental, social and governance-related obligations.

Management packages were also recently reformed.

15 Tips and traps

15.1 What are your top tips for the smooth closing of private M&A transactions and what potential sticking points would you highlight?

To ensure a smooth closing in private M&A transactions, it is essential to establish clear deadlines and a structured timetable while ensuring effective coordination between all parties involved. A well-organised approach helps to maintain momentum and minimises execution risks. Adopting an operational mindset throughout the process ensures that negotiations remain focused on practical outcomes rather than legal formalities. On a technical level, the use of electronic signatures has become a significant advantage, allowing parties to execute documents remotely and accelerating the closing process.

Despite careful planning, certain sticking points can delay or complicate the transaction. Regulatory approvals remain a critical factor, particularly for deals involving foreign investment screening or competition clearance. Additionally, the negotiation of representations and warranties and indemnification mechanisms can become a source of difficulties, especially when due diligence reveals significant risks that require tailored protections. Transactions involving sensitive activities may also face heightened regulatory scrutiny or require additional approvals from authorities. Anticipating these potential challenges and addressing them proactively during the negotiation phase can significantly reduce closing risks and ensure a successful outcome.

This guide is dedicated to the memory of our partner and friend Lisa Becker. Her insight and dedication were invaluable to this work and continue to inspire all who had the privilege of working alongside her.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.