Selective Recovery and Increased Strategic Focus

Private equity and M&A activity in Denmark remained subdued in 2024 and into 2025, with many processes delayed, paused, or never launched. While some recovery is visible in specific areas, overall market activity remains below historic norms. Investors are more selective and focus primarily on resilient businesses with solid fundamentals. Only a limited number of structured processes have been completed, and most activity has consisted of opportunistic add-on acquisitions, occasional carve-outs, and selected secondary buyouts.

The Danish M&A market continues to be dominated by private transactions, with very few public deals seen in 2024. Deal terms are generally more buyer-friendly, often involving extended diligence periods, earn-outs, vendor financing, and other holdback mechanisms. There is also a clear trend towards bilateral deals rather than large auction processes. In cases where auctions do occur, the terms typically remain seller-friendly.

Private equity activity in Denmark remains at a low level. This is contrary to the general market expectations in Denmark (and in Europe) at end of 2024, where increased activity was expected.

However, general geopolitical uncertainty and the question of introduction of tariffs affecting global trade/trade patterns have created increased volatility. Buyers are more risk averse and conservative in valuations affecting the expectation that the valuation gap between sellers and buyers would increasingly be levelled out in 2025, also given decreasing interest rates. Combined with a cautious approach among financial sponsors, these conditions have kept overall activity below expectations, with main activity being within add-on acquisitions and small and mid-market transactions.

The volatility and gap in price expectations has instead increased the use of continuation vehicles.

Sector Trends: Healthcare, Tech, Infrastructure and Defence

In 2025, private equity interests have mainly focused on sectors seen as structurally strong or offering long-term growth. Nevertheless, several processes have stalled or remain on hold due to geopolitical uncertainty and limited willingness to make long-term commitments.

The healthcare and pharmaceutical sectors continue to draw steady investor attention, supported by demographic developments and ongoing innovation. Infrastructure and energy transition assets – particularly within logistics and renewables – remain key areas of interest due to their potential to deliver stable returns in uncertain market conditions. Technology and software also continue to attract investment, especially in connection with buy-and-build strategies. Additionally, there has been a growing focus on the defence and security sector, including cybersecurity, critical infrastructure, and dual-use technologies, reflecting broader geopolitical developments and increased defence spending in Europe.

Macroeconomic and Geopolitical Influences

Geopolitical tensions, inflation, and supply chain disruptions have affected private equity activity in Denmark. Tariffs and changing global supply chains remain major uncertainties that complicate long-term investment planning.

Although interest rates have stabilised during the first half of 2025, financing costs remain elevated compared to pre-2022 levels. This has led to more transactions being funded with equity or modest leverage.

Deal Structuring and Process Trends

In the current environment, seller financing, deferred payments and earn-outs are increasingly used to bridge valuation gaps. Competitive auction processes have become less common, with a shift towards bilateral and proprietary deals due to market uncertainty and more cautious buyer behaviour. Further, transactions starting as auction processes have in increased number ending as bilateral processes (or paused).

ESG and Sustainability Reporting Requirements

Danish private equity portfolio companies are increasingly subject to regulatory requirements concerning sustainability and ESG disclosures. The adoption of the Corporate Sustainability Reporting Directive (CSRD) has had a notable impact on companies that meet the relevant EU thresholds, particularly larger or listed entities. As a result, ESG compliance and readiness have become important areas of focus in both due diligence and post-acquisition planning. This is also a focus of Danish pension funds, who have traditionally been large investors in private equity in Denmark.

AIFMD

The revised AIFMD regime (often referred to as AIFMD II) entered into force domestically in June 2025 and introduced more detailed requirements for expense transparency, liquidity management tools and delegation oversight. Managers operating under the Danish Alternative Investment Fund Manager Act must register with the Danish Financial Supervisory Authority (Finanstilsynet) and comply with reporting requirements. Fund structures are typically established as Danish Kommanditselskaber (K/S), which provide tax transparency and flexibility in profit allocation.

Merger Control and Competition Law

The Danish Competition and Consumer Authority (DCCA) is the primary regulator for merger control in Denmark. Notifiable transactions must be cleared before closing if certain turnover thresholds are met. Private equity-backed transactions are treated similarly to corporate deals, although funds with multiple portfolio companies must assess whether control or influence exists across investments when calculating turnover. Transactions that trigger EU thresholds fall under the exclusive jurisdiction of the European Commission.

FDI Screening Regime

Denmark’s Foreign Direct Investment (FDI) regime has become a standard consideration in private equity deals. Administered by the Danish Business Authority, the regime applies to both mandatory and voluntary filings, depending on the sector. Private equity investors acquiring control in critical sectors, such as defence, IT security, or infrastructure, must obtain prior approval. While the regime formally applies to all non-Danish investors, scrutiny may be heightened where sovereign wealth funds or state-affiliated co-investors are involved. In such cases, transparency of fund structure and governance is key.

In addition to mandatory filings, the Danish FDI regime provides the Danish Business Authority with so-called call-in powers, allowing it to review and potentially block or impose conditions on foreign investments in non-notifiable sectors if they pose a risk to national security or public order. Although the threshold for exercising these powers is high, private equity sponsors increasingly consider the potential for call-in when structuring transactions – particularly in sensitive areas such as dual-use technologies, AI, quantum, or access to critical data infrastructure. As a result, early stage screening and pre-clearance discussions with the authority have become a more common feature in high-risk sectors.

EU Foreign Subsidies Regulation (FSR)

The EU FSR regime, which became effective in 2023, is relevant for private equity transactions involving EU targets or bidding processes. Under the regime, parties must notify if financial contributions from non-EU countries exceed certain thresholds. While the regime has only recently begun to impact Danish deals, private equity bidders, particularly those participating in public tenders, must assess whether FSR filings are required. Private equity sponsors have responded by incorporating FSR risk assessments into early transaction planning.

Other Regulatory Considerations: Anti-Bribery, Sanctions and ESG

Denmark maintains a robust anti-bribery and sanctions framework, in alignment with EU law. There have been no major legislative changes in the past 12 months, but enforcement risk and compliance expectations remain high, especially for cross-border sponsors. ESG compliance has become a growing area of focus, driven by CSRD implementation and increased regulatory expectations.

Comprehensive but Targeted Legal Due Diligence

Key focus areas include corporate structure, financing arrangements, material contracts, employment matters, real estate, compliance, and litigation. ESG compliance and data protection are also being integrated into the due diligence process, particularly where the target operates in regulated or data-intensive sectors.

Buyers typically apply a risk-based approach, prioritising red-flag issues with potential financial, operational or reputational impact. Findings are documented in a legal due diligence report, which often forms the basis for key transaction documents, including warranties, disclosures and potential closing conditions.

Where warranty and indemnity (W&I) insurance is used, the scope and format of legal due diligence is often expanded and formalised to meet insurer requirements. In particular, insurers typically expect a structured, risk-based due diligence process covering key areas such as tax, litigation, regulatory, ESG and compliance. The extent and granularity of the due diligence may affect both the insurability of certain risks and the level of coverage. As a result, PE sponsors typically invest significant time and resources to ensure a well-rounded diligence process, on the sell-side by way of vendor due diligence reports and on the buy-side by way of ensuring cohesion between the vendor due diligence (if available) and additional due diligence.

Consequently, legal due diligence remains a key workstream in Danish private equity transactions, particularly in transactions involving W&I insurance.

Key Focus Areas

Beyond standard corporate and contractual matters, the following areas are typically in focus.

• Employment and incentive structures, including compliance with the Danish tax rules under Section 7P of the Tax Assessment Act, which allow for favourable tax treatment of equity-based compensation.
• Regulatory compliance, especially under Danish FDI, merger control, and sector-specific regimes.
• Litigation and contingent liabilities.
• Data protection and IT, especially in tech-driven or data-rich businesses.
• Change-of-control clauses, which are carefully reviewed to ensure deal continuity.
• Intellectual Property Rights, especially in IP-focused businesses, including software companies.

Market Standard in Auction Processes

Vendor due diligence (VDD) is a common feature in private equity-led auction processes in Denmark. It is typically used to streamline the sale process, ensure consistency of information and reduce execution risk. The VDD is prepared by external advisers (legal counsel for legal VDD). Legal VDD usually covers key areas such as corporate structure, material contracts, employment, real estate, litigation, compliance and intellectual property.

Formats and Report Types

Depending on deal size and process structure, the sell-side may provide:

• a full-scope legal vendor due diligence report;
• a red-flag vendor report highlighting key risks only; or
• a legal factbook summarising factual information without legal conclusions.

The choice depends on the nature of the sale process and the expectations of potential buyers and the insurability of such report in context of W&I insurance.

Reliance and Access

While initial reports are shared for information purposes, it is increasingly common, especially in competitive or sponsor-to-sponsor deals, for shortlisted bidders or the ultimate buyer to receive reliance on the legal VDD report. This is often coupled with W&I insurance processes, where the insurer also receives access to the report and underlying documentation. Reliance is usually subject to execution of a reliance letter and may be limited in scope or liability.

The use of W&I insurance in Danish private equity transactions has contributed to a more structured approach to legal due diligence. To obtain broad coverage and limit exclusions, insurers generally require that key risk areas are adequately addressed, which may influence the scope, format and supporting documentation of the VDD in auction processes.

Negotiated Private Transactions

In Denmark, private equity acquisitions are almost exclusively structured as privately negotiated share deals under Danish contract law, typically documented in a sale and purchase agreement (SPA). The use of statutory mergers is very rare in the context of private equity transactions.

Private vs Auction Transactions

While the core structure remains similar, the terms of the acquisition often differ depending on whether the transaction is a bilateral deal or a competitive auction process.

• In bilateral negotiated transactions, there is generally more flexibility for bespoke risk allocation, including tailored indemnities, negotiated earn-outs, and more room for mutual negotiation.
• In auction processes, terms are more seller-friendly and standardised. The transaction documents are typically prepared by the seller and negotiated only to a limited extent during the process. This includes tighter limitations on warranties, exclusion of indemnities, no liability if W&I insurance does not cover, and use of locked-box pricing mechanisms.

W&I insurance is commonly used to streamline negotiations and reduce post-closing liability for private equity sellers.

Acquisitions via BidCo Structures

Private equity-backed acquisitions in Denmark are typically structured through Danish or foreign special purpose vehicles (SPV/BidCo). The BidCo is usually established solely for the purpose of the acquisition and will often be owned by another SPV (TopCo) to allow for structured financing. The TopCo will then be owned by one or more fund entities, co-investors and the respective management.

The use of a BidCo/TopCo enables ring-fencing of liabilities, facilitates debt financing and allows for a tailored equity structure, including sweet equity instruments for management and layered investor instruments for the fund and co-investors.

Involvement of the Fund

The private equity fund itself usually does not become a direct party to the acquisition or sale documentation. Instead, the fund is typically represented indirectly through its ownership of BidCo and through control mechanisms in shareholders’ agreements or governance documents.

However, in larger or more competitive transactions, it is not uncommon for the fund or its manager (GP) to provide equity commitment letters or support letters to sellers or lenders, offering additional contractual certainty.

Combination of Equity and Acquisition Financing

Private equity transactions in Denmark are typically financed through a combination of equity contributions from the sponsor and acquisition debt provided by third-party lenders and potentially re-investment by the seller and/or management of the target.

Equity Commitment Letters

To provide contractual certainty to sellers, particularly in competitive processes, it is a seller requirement that private equity sponsors issue equity commitment letters upon submission of binding offers. These letters confirm that the fund has committed to fund the BidCo with the necessary equity to complete the transaction, subject to agreed conditions.

Debt Financing and Comfort Mechanisms

The starting point in a competitive process is ascertaining funds which, in addition to the equity commitment letter, requires a debt commitment letter for the debt-financed component of the acquisition. In less competitive processes, the lower level of debt-financing comfort will typically be accepted, such as:

• debt commitment letters from lenders (subject to standard conditions);
• detailed funding plans in the SPA; and
• “soft” comfort in the form of bank engagement letters or term sheets.

W&I Insurance as an Enabler

The widespread use of W&I insurance in Danish PE deals also affects funding structure, as insurance proceeds are often factored into coverage and security packages from both equity and debt providers.

Consortia and Club Deals Remain Limited but Possible

Transactions involving a consortium of private equity sponsors are mostly seen in large transactions and cross-border transactions where deal size or sector expertise calls for shared exposure. The Danish market is dominated by mid-market activity, where single-sponsor transactions are more common due to efficiency and governance simplicity.

Co-Investments Alongside the Lead Fund

Co-investments by limited partners (LPs) alongside the lead fund or general partner (GP) are relatively common in Denmark. These co-investors typically take passive, minority stakes and do not engage directly in governance or decision-making. Co-investment structures are often pre-negotiated and allow for increased ticket size flexibility for the fund without concentration issues.

Corporate–Private Equity Partnerships

Consortia comprising a private equity fund and a strategic corporate investor are not very common in Denmark. When such structures arise, they are typically used in transactions where the corporate brings sector-specific know-how or clear industrial logic, while the private equity sponsor contributes capital structuring and transactional expertise.

Locked-Box Structures Dominate in Sponsor-to-Sponsor Deals

The predominant pricing mechanism in Danish private equity transactions is the fixed-price model with a locked-box structure. This approach is particularly common in sponsor-to-sponsor transactions and competitive auction processes. It provides pricing certainty and limits the need for post-closing adjustments. The locked-box date is typically set several months prior to signing, with contractual protections in place to prevent value leakage.

Completion Accounts Still Used in Bespoke or Bilateral Deals

Completion accounts continue to be applied in certain transactions, particularly in bilateral deals or where there is a higher degree of valuation uncertainty. These structures allow for post-closing purchase price adjustments based on actual financial metrics, such as cash, debt, and working capital as of the closing date.

Earn-Outs, Deferred Consideration and Roll-Over Equity

Earn-out mechanisms and deferred consideration are used in the Danish private equity market, particularly in transactions where bridging a valuation gap is relevant or where continued involvement of key individuals post-closing is expected. This approach is typically seen in founder-led transactions, the lower-mid-market segment, or in deals involving ongoing operational roles for the sellers.

Roll-over equity arrangements are more commonly applied and are typically used when a private equity seller retains a minority stake or when management reinvests alongside an incoming financial sponsor.

Effect of Private Equity Involvement

Private equity sellers generally prefer transaction structures that limit post-closing exposure, which contributes to the widespread use of locked-box pricing and W&I insurance. On the buy-side, private equity-backed purchasers may adopt more complex risk allocation structures, including elements such as seller financing or contingent payments, depending on the transaction context.

Interest on Equity Price is Typical

In Danish private equity transactions employing a locked-box structure, it is common practice to include a ticking fee or interest on the equity value to compensate the seller for the period between the locked-box date and completion. This interest is typically expressed as a fixed daily rate or annualised percentage and intends to reflect the earnings from the locked-box date to closing which earnings the buyer will retain by way of the locked-box. The specific rate is negotiated between the parties and may vary depending on factors such as transaction size, sector, and process dynamics.

Reverse Interest on Leakage

Reverse interest on leakage, ie, compensation payable by the seller for any unauthorised value transfers from the target company during the locked-box period, is not widely used. Such leakage is instead typically reimbursed on a DKK-for-DKK basis.

Negotiation Points

Both ticking fees and the exact terms, including applicable rates, calculation periods, and definitions of permitted versus prohibited leakage, are frequently subject to negotiation. These elements are influenced by the relative bargaining positions of the parties, the availability of warranty and W&I insurance, the expected duration for obtaining regulatory approvals (where relevant) and whether the transaction is conducted as a bilateral negotiation or through a competitive auction process.

Expert Determination for Completion Accounts

In Danish private equity transactions, it is standard market practice to include a dedicated dispute resolution mechanism for matters related to the calculation of consideration. In deals based on a completion accounts structure, the parties typically agree that any disagreements concerning the determination of the closing accounts or related post-closing adjustments will be resolved by an independent expert. This expert is often a chartered accountant jointly appointed by the parties or designated by a professional or arbitral institution.

Less Common in Locked-Box Structures

In transactions structured with a locked-box mechanism, pricing disputes are generally less common due to the fixed nature of the purchase price. Here, the general dispute resolution venue is used and if a dispute relates to potential disagreements on, for example, leakage or the interpretation of permitted leakage provisions, an appropriate expert may be appointed by the court/tribunal (as applicable).

Arbitration or Courts for Broader Disputes

Contractual disputes beyond pricing matters, if any, carved out for expert determination, are typically resolved through either Danish courts or arbitration, depending on the nature and complexity of the transaction. Arbitration is more frequently chosen in cross-border or sponsor-to-sponsor transactions due to its confidentiality, flexibility, and cross-jurisdictional enforceability.

In Danish private equity transactions, deal certainty is an almost non-negotiable requirement. Consequently, a transaction will typically only be subject to a limited set of unavoidable conditions. The most common are mandatory and suspensory regulatory approvals, such as merger control clearance and/or FDI approval where relevant. These are generally structured as standard conditions precedent.

Conditions related to financing are rarely seen. Buyers are generally expected to have certain funds in place at signing, and conditionality on financing is typically not accepted. Similarly, shareholder approval on the buyer side is uncommon, unless structurally necessary (eg, listed buyer entities or complex fund structures).

MAC or material adverse effect (MAE) provisions rarely occur. When included, they tend to be narrowly drafted and heavily negotiated. Their practical application is limited, and they are seldom invoked.

Conditions relating to third-party consents (such as key contracts with change of control clauses) are very rare to avoid depositing the deal certainty with a third party. Only if a target is a “single-customer” business where the customer has a long non-terminable contract, you would see consent from a contract party as a condition precedent. In practice, parties often manage such risks through pre-signing co-ordination or post-closing covenants rather than as formal conditions.

In summary, the use of conditionality in Danish private equity deals is generally limited, reflecting a market where deal certainty is prioritised but also subject to case-specific negotiation dynamics.

“Hell or high water” undertakings are a standard sell-side starting point in Danish private equity led auctions. Whether or not to accept as a private-equity buyer is a balance between presenting an overall attractive offer and risk.

Distinction Between Merger Control and FDI

Parties often distinguish between merger filings (under Danish or EU rules) and FDI approvals under the Danish screening regime. Merger control procedures generally follow a more predictable framework with established timelines, whereas the FDI review process may involve a higher degree of discretion, including considerations related to national security. This also means that a private-equity buyer – especially if the target is not an ad-on nor a potential competitor of other portfolio companies – can accept a hard hell or high water undertaking for merger control clearances. In contrast, more efforts-based obligations rather than absolute requirements will often be the approach in relation to FDI clearance.

Impact of the EU Foreign Subsidies Regulation (FSR)

In transactions where an FSR filing may be relevant – for instance, in connection with public tenders or larger deals involving financial contributions from non-EU countries – parties may address the issue through specific undertakings aimed at ensuring timely and co-ordinated filings. Given the thresholds involved, the FSR regime has not yet had a significant impact on Danish private equity deals.

Break Fees

Break fees in favour of the seller are not a standard feature in Danish private equity transactions. When agreed, they are typically seen in larger or highly competitive processes, or in situations where the seller is exposed to material execution risk due to the conditional nature of the agreement, including if there is a real regulatory risk on the private-equity buyer side. Common triggers include failure to obtain required regulatory approvals, failure to secure financing, or failure to complete the transaction within an agreed longstop date.

Typical Size and Structure

Where break fees are used, the agreed amount is generally between 1–3% of the equity value. They are often structured as liquidated damages and become payable upon breach of clearly defined obligations. Danish law does not prescribe statutory limits for break fees, but their enforceability is subject to general contract law principles, such as reasonableness, proportionality and good faith. In practice, excessive or punitive fees may be challenged or found unenforceable.

Reverse break fees are not common in private-equity transactions.

Termination Rights Tied to Regulatory and Closing Conditions

In Danish private equity transactions, the acquisition agreement typically includes mutual termination rights if closing has not occurred by a specified longstop date, including if mandatory condition precedent, is not satisfied by the longstop date, provided the failure of such satisfaction is not caused by the party wishing to terminate.

Apart from that, only material breaches such as not delivering the shares unencumbered or not paying the purchase price at closing would allow a termination by the non-defaulting party.

Typical Longstop Date

The longstop date is usually set between three and six months after signing, depending on the anticipated regulatory approvals and complexity of the deal. In transactions involving multiple jurisdictions, complex merger filings with phase 2 investigations expected and/or complex FDI reviews, longer long-stop periods may be agreed and can be between more than 12–24 months. Right to extensions may also be pre-agreed if specific conditions are progressing but not yet fulfilled.

Private Equity Sellers Aim for Clean Exits

In Danish transactions involving a private equity seller, the allocation of risk is typically more seller-friendly than in corporate-to-corporate deals. Private equity sellers seek a clean exit with minimal post-closing liability. This is reflected in limited warranty packages, short limitation periods and low caps on liability. The widespread use of W&I insurance further shifts risk away from the seller. This applies no matter if the buyer is private equity-backed or a corporate.

Buyers More Focused on Downside Protection

When the buyer is private equity-backed, there is often a stronger focus on legal protections, including robust warranties, covenants and indemnities when buying from a corporate. Corporate buyers with sector-specific knowledge about the target may be less risk-averse as they can valuate the risks of the target better.

Corporate Sellers Often Accept Broader Exposure

Corporate sellers, especially strategic divestors, may be willing to provide broader warranties and accept greater liability to facilitate a deal. This is particularly the case where ongoing commercial relationships or reputational considerations are involved.

Overall, private equity involvement tends to create sharper risk allocation boundaries, with greater reliance on market tools like W&I insurance, locked-box pricing and limited recourse structures.

Warranties From Private Equity Sellers via W&I

Private equity sellers in Denmark typically provide a broad set of warranties on exit when backed by W&I insurance. These generally include title and capacity warranties, often referred to as fundamental warranties, tax warranties, and business warranties.

Specific indemnities are rarely provided by private equity sellers, unless there are known risks that cannot be insured or ring-fenced otherwise. Private equity sellers usually resist general indemnity obligations, and risk is instead allocated through disclosure and insurance, including in respect of tax. The use of specific risk insurance, eg, for an identified tax exposure, is increasingly used if this can facilitate a clean exit for the private-equity seller.

W&I Insurance and Market Limitations

W&I insurance is widely used in Danish private equity exits, particularly in sponsor-to-sponsor and auction processes. In these transactions, the seller’s liability for business warranties is assumed by the insurer, subject to customary exclusions and a policy retention. Warranties are commonly insured for up to 20–40% of the purchase price, and the liability period for business warranties is typically 24 months, and for fundamental warranties it is 84 months. A recent trend is also that W&I insurers offer to “scrape” certain knowledge and materiality qualifiers from the warranties to gain a competitive edge in the insurance market. In competitive processes, the seller will typically not have liability for warranties excluded from W&I coverage nor for claims in excess of the W&I insurance cap (including no liability for claims under fundamental warranties exceeding the cap).

Disclosure

It is customary in Denmark to allow disclosure of the data room against the warranties. However, specific limitations may apply, such as requiring “fair” disclosure and excluding disclosures that are merely general or unspecific. Known issues are excluded from coverage under W&I insurance and are instead addressed through price adjustments or specific indemnities or transaction-specific insurances, if negotiated.

Private Equity Buyer Impact

Where both buyer and seller are private equity-backed, there is a strong preference for market-standard allocation: nil seller recourse, W&I coverage, and reliance on disclosure and diligence. This creates a predictable and efficient transaction environment focused on execution certainty.

Use of W&I Insurance

W&I insurance is a commonly used instrument in Danish private equity transactions. It is typically applied in both buy-side and sell-side processes and generally covers business warranties. In most cases, tax matters are also included, subject to standard exclusions. Coverage of fundamental warranties may either be included in the policy or remain with the seller, depending on the transaction structure and negotiation outcome.

The use of W&I insurance is particularly frequent in auction processes and transactions involving financial sponsors, where limiting residual seller liability is a priority. Transaction documentation is usually aligned with the terms and limitations of the insurance policy. As also stated previously, in competitive processes with a private-equity seller, there will be no residual liability on the seller and all warranties, including tax and fundamental warranties, will be a matter between the buyer and the insurer.

Escrow and Retention Arrangements

Where W&I insurance is used, escrow, vendor loan notes or other retention arrangements are not common, especially not where the seller is private-equity backed. However, such mechanisms may still be implemented in specific situations, including:

• where specific indemnities are negotiated and excluded from insurance coverage;
• in bilateral transactions; and
• to secure obligations under fundamental warranties, particularly in smaller transactions.

Other Contractual Protections

Additional protections that are often included in Danish private equity transactions comprise the following.

• Leakage provisions in locked-box mechanisms, usually backed by contractual remedies such as compensatory interest.
• Interim covenants restricting the seller’s conduct between signing and closing.
• Anti-sandbagging and no-reliance clauses, addressing the allocation of risk based on pre-closing information.
• Liability limitations that reflect the W&I policy terms, including survival periods, caps, and thresholds for claims.
• Insurers may typically only subrogate liability of the sellers in the event of fraud or wilful misconduct.

Litigation is Rare but Focused When It Occurs

Litigation in connection with private equity transactions in Denmark is relatively rare. Most disputes are resolved through negotiation or alternative dispute resolution mechanisms, such as expert determination or arbitration, particularly in cross-border or sponsor-to-sponsor deals. The prevalence of W&I insurance also contributes to a lower incidence of post-closing litigation.

Typical Areas of Dispute

When disputes do arise, they typically relate to:

• earn-out provisions and post-closing performance metrics;
• purchase price adjustments under completion accounts;
• claims for breach of warranties, including financial statements or compliance matters (with/without fraud allegations);
• interpretation of disclosure limitations or alleged non-disclosure; and
• specific indemnities, especially in tax or regulatory matters.

Public-to-Private Transactions

Public-to-private transactions involving private equity-backed bidders are relatively rare in Denmark, primarily due to the limited number of listed companies and the relatively small size of the Danish capital market compared to other jurisdictions. That said, such transactions do occur from time to time and are subject to the rules set out in the Danish Capital Markets Act and the Danish Executive Order on Takeover Bids, rules for issuers on Nasdaq Copenhagen (with respect to matters such as delisting) as well as guidance issued by the Danish Financial Supervisory Authority (Finanstilsynet).

Role of the Target Company and Its Board

In the context of a public-to-private, the target company’s board plays an important advisory role. Although the bidder is not legally required to seek board approval, it is customary for the board to issue a reasoned opinion on the offer, including an assessment of the offer price and strategic rationale. The board is expected to act independently and in the interest of all shareholders, and it may engage external financial and legal advisers to support its assessment. Where management is expected to participate in the bidder group post-closing, particular attention is given to managing conflicts of interest and ensuring proper governance during the offer period. The board is not under any obligation to organise an auction and may on the contrary undertake exclusivity obligations (subject to fiduciary out).

Relationship or Transaction Agreements

A “bid conduct agreement” between the bidder and the target will often be entered into as part of negotiating a transaction. In addition, the bidder will often seek to obtain irrevocable undertakings from major shareholders, if relevant.

Statutory Disclosure Obligations Upon Threshold Crossings

In Denmark, any shareholder acquiring or disposing of shares in a listed company must notify both the company and the Danish Financial Supervisory Authority (Finanstilsynet) when its voting rights or share capital crosses any of the following thresholds: 5%, 10%, 15%, 20%, 25%, one-third, 50%, two-thirds or 90%. These rules apply to all shareholders, including private equity funds, and ensure market transparency in listed companies.

Attribution and Aggregation for Private Equity Investors

Private equity bidders must carefully assess whether holdings by affiliated entities, parallel funds, or co-investors are subject to aggregation under the Danish rules. Attribution may also apply to instruments or rights convertible into shares. Misinterpretation of these rules may lead to delayed or deficient notifications, resulting in reputational and regulatory consequences.

Tender Offer – Specific Disclosure

In the context of a voluntary tender offer, bidders are also subject to additional disclosure requirements under the Danish Takeover Order. These include the identity of the bidder, terms of the offer, financing arrangements, and any intentions regarding the future business or governance of the target. Transparency is especially relevant for private equity bidders to avoid regulatory delays or public criticism.

Mandatory Bid Obligation at 33.3% Control Threshold

Under Danish law, a mandatory takeover offer must be made if a shareholder, alone or acting in concert, acquires control of a company listed on a regulated market in Denmark. Control is presumed when the shareholder holds one-third (33.3%) or more of the voting rights unless it extraordinarily can be documented not to result in control (eg, if an existing major shareholder holds more shares).

Acting in Concert and Indirect Control Risks

Private equity sponsors must consider acting-in-concert rules when planning acquisitions, particularly where control is acquired through multiple fund entities, co-investment vehicles, or existing portfolio companies.

Regulatory Enforcement and Transaction Structuring

Failure to launch a mandatory bid can result in the suspension of voting rights and potential regulatory enforcement. As a result, legal assessments of control, attribution and co-ordination are critical in structuring acquisitions. In certain cases, exemption requests may be submitted to the Danish Financial Supervisory Authority, such as for purely passive investments or technical breaches.

Cash is the Prevailing Form of Consideration

In Danish public tender offers, cash is by far the most common form of consideration. This reflects market expectations for liquidity and certainty, especially among institutional investors and minority shareholders. Share consideration may occasionally be used, but primarily in strategic or cross-border transactions involving industrial buyers or listed acquirers.

Minimum Price Rules in Tender Offers

Under the Danish Takeover Order, a mandatory offer must be made at a price that is at least equal to the highest price paid by the bidder (or parties acting in concert) for shares in the target company within the preceding six months. This minimum price rule ensures equal treatment of all shareholders.

In voluntary offers, there is no statutory minimum price, but a post-offer six months cooling period during which acquiring additional shares above the offer price will trigger compensation to shareholders having tendered their shares in the offer.

Conditions Are Permitted but Subject to Regulatory Oversight

In Danish public takeover offers, conditions are generally permitted as long as they are objective, clear and not discretionary in nature (ie, where the offeror is in control of the condition). The Danish Financial Supervisory Authority may intervene if conditions are deemed too vague or give the bidder undue flexibility. Common conditions include minimum acceptance thresholds, regulatory approvals, and no material adverse change.

Financing Conditions Are Not Allowed

Private equity-backed bidders are expected to have secured financing in place or provide sufficient certainty of funds, often through equity commitment letters and debt commitment documentation. The take-over offer must include information on its financing, and the offer cannot be conditional on obtaining such financing.

Deal Security Measures

Bidders may seek deal protection mechanisms such as:

• irrevocable undertakings from major shareholders to accept the offer;
• match rights or notification rights in case of competing bids;
• non-solicitation or no-talk clauses with the target (subject to fiduciary out); and
• limited break fees, though these are rare and must be justifiable.

Governance Rights for Significant Minority Shareholders

If a private equity bidder acquires less than 100% of a listed target but more than 50%, it generally controls the company, including that it can elect the majority of the board of directors.

Debt Push-Down Mechanisms

Subject to complying with general corporate law, a debt push-down will typically be adopted through declaration of ordinary or extraordinary dividends. Dividends are decided by simple majority and if the private equity bidder holds more than 50% a debt push-down can be achieved.

Squeeze-Out and Sell-Out Rights

A bidder who acquires more than 90% of the share capital and voting rights in a listed company may initiate a compulsory squeeze-out of the remaining minority shareholders at a fair price. Minority shareholders also have a corresponding sell-out right. If the +90% is achieved by way of the voluntary offer, the offer price will be deemed a fair price. If the +90% is only obtained subsequently, the process is court-supervised, and minority shareholders may request a formal valuation but must pay for such valuation if not successful in challenging the price offered.

Irrevocable Commitments Are Common in Danish Takeover Practice

Irrevocable commitments from principal shareholders are common in Danish public takeover offers, particularly where a private equity bidder needs to demonstrate support to regulators or secure minimum acceptance levels. These commitments are typically obtained from large institutional investors, founders, or strategic shareholders.

Timing of Negotiations

Negotiations for irrevocable undertakings usually take place in parallel with the bidder’s due diligence and offer preparation. In some cases, cornerstone shareholders are approached even earlier to assess deal feasibility and signal market support. The undertakings are often executed shortly before public announcement of the offer.

Nature and Flexibility of the Commitments

Irrevocable undertakings in Denmark are usually binding and do not include “fiduciary outs”. However, there are instances such as where undertakings lapse if a competing offer is made at a clearly higher price and the original bidder does not match it.

Widely Used in Danish Private Equity Transactions

Equity incentivisation of the management team is a common and well-established feature of private equity transactions in Denmark.

Typical Ownership Levels

The management team’s collective equity stake typically ranges from 5% to 15% of the fully diluted share capital of the holding structure, depending on the size of the business, the level of reinvestment by existing management, and the relative bargaining power of the parties. In founder-led or growth equity deals, the management team may hold a larger stake, whereas in classic buyouts, their ownership is more often in the lower end of the range.

In most cases, the structure is designed to offer meaningful upside while retaining leaver and vesting protections to ensure retention and alignment throughout the investment horizon.

Sweet Equity is Commonly Used

In Danish private equity transactions, management participation is typically structured through a sweet equity model. This allows the management team to invest in a junior class of equity that provides disproportionate upside if certain value thresholds or exit multiples are achieved, while also bearing higher downside risk.

Structure of Sweet Equity

The sweet equity is often structured through ordinary shares with limited initial value, typically issued by the same BidCo or holding company through which the private equity sponsor holds its investment. Management may also invest a portion in the same instruments as the fund, known as the institutional strip, to ensure partial alignment across the capital structure.

Use of Preferred Instruments

Preferred equity or shareholder loans are generally reserved for the fund and other institutional investors to create a layered capital structure and/or the composition of preferred vs sweet equity is 80/20 for the fund and 30(40)/70(60) for management. In some cases, preference shares or ratchet mechanisms are used to prioritise return of capital and to incentivise outperformance through waterfall distributions.

The structure is typically documented in a shareholder agreement and will include detailed provisions on vesting, leaver scenarios, and transfer restrictions.

Vesting is Standard in Danish PE Structures

Vesting provisions are commonly applied to management equity in Danish private equity transactions – typically over a period of three to five years. Vesting may apply to all or part of the management’s sweet equity, depending on the size of their investment and seniority.

Typical Leaver Classifications

Leaver provisions generally distinguish between the following.

• Good leavers – usually defined as departure due to death, long-term illness, retirement or termination without cause. Good leavers may either retain vested equity and be obliged to offer unvested shares at fair market value or be obligated to offer all equity at fair market value.
• Bad leavers – typically defined as voluntary resignation or termination for cause. Bad leavers often have to sell unvested equity at a discount to either entry price or fair value and may be required to sell vested shares at entry price or a discount to fair value.

Customary Restrictive Covenants

In Danish private equity transactions, management shareholders are typically subject to a set of restrictive covenants (in accordance with statutory limitations), including:

• non-compete obligations (commonly 12–24 months post-exit or termination);
• non-solicitation of employees (six months from closing);
• non-solicitation of customers or suppliers (commonly 12–24 months post-exit or termination); and
• confidentiality undertakings.

Non-disparagement undertakings are seen less often but Danish law does not have any statutory restrictions on such clauses.

Form and Documentation

Restrictive covenants are usually included in both the management’s employment agreement and the shareholder agreement. This dual anchoring ensures enforceability and allows different remedies depending on the nature of the breach.

Enforceability Under Danish Law

Danish courts generally uphold restrictive covenants if they are reasonable in scope, duration and geography. Non-compete clauses are subject to the Danish Employment Clauses Act, which imposes limitations and, in many cases, requires financial compensation to the employee if invoked through the employment contract. For post-termination restraints in shareholder agreements, enforceability depends on proportionality and legitimate business interest. Non-solicitation of employee clauses is prohibited except for a period of six months from closing of a transaction.

Minority Protections Are Selectively Granted

Manager shareholders in Danish private equity transactions typically receive limited minority protection. The primary focus is on economic alignment rather than governance control. Only if the manager is also a founder/large selling shareholder will more specific negotiations and rights be available. Anti-dilution is primarily a matter of the fund undertaking not to issue shares below market value unless as part of future incentive programmes.

Veto Rights and Governance Influence

Only in certain cases, particularly where management holds a significant mark post-closing, are a limited set of consent rights granted.

Directors’ appointment rights for management are rare but may be considered in founder-led situations or where management holds a meaningful minority stake.

Exit Rights

Management typically does not have any control over the timing or form of the private equity fund’s exit. Tag-along rights are commonly granted but drag-along obligations will always be in place.

Control Through Board Representation and Governance Rights

Private equity fund shareholders in Denmark typically exercise control over their portfolio companies through a combination of board appointment rights and extensive information rights. In minority investments, the private equity fund will typically remain in control of an exit and, further, have certain reserved matters protected.

Board Appointment Rights

In minority investments, the fund will usually have the right to appoint one or more members to the board of directors of the portfolio company, including the chair. In majority investments, the fund often holds a controlling board position. In minority situations, appointment rights are negotiated based on ownership thresholds and may include observer rights.

Reserved Matters

Key strategic decisions are in minority investments typically subject to shareholder consent through reserved matters provisions. These may include:

• changes to share capital or articles of association;
• acquisitions or disposals above a certain threshold;
• incurrence of debt or granting of security;
• approval of budgets and business plans;
• changes to executive management;
• entry into material contracts or related-party transactions; and
• dividend policy and distributions.

Information Rights

Private equity funds customarily receive robust financial reporting, including monthly management accounts, quarterly financials, annual budgets, and access to auditors. These rights are often contractual and supplement statutory rights under Danish company law.

Limited Liability is the General Rule

Under Danish law, a private equity fund acting as shareholder is generally not liable for the obligations or actions of its portfolio company. The corporate veil ensures that liability is limited to the amount invested, and Danish courts respect the legal separation between shareholders and the company, even in cases of full ownership.

Exceptions Are Narrow and Rarely Applied

In exceptional cases, a fund may face liability if it is found to have exercised actual control in a manner that goes beyond normal shareholder influence, and where such control has caused harm to third parties. This may include situations involving:

• fraud, wilful misconduct or gross negligence;
• undercapitalisation or misuse of the company form (piercing the corporate veil); and
• de facto management or shadow directorship.

However, such cases are extremely rare in Danish legal practice and would require clear evidence of abuse of the corporate structure.

Practical Risk Management

In practice, private equity funds mitigate such risks through proper corporate governance, arm’s length dealings and formal separation between fund representatives and portfolio management. Danish courts generally uphold this approach and are reluctant to impose shareholder liability without compelling justification.

Private Sales Remain the Dominant Exit Route

In Denmark, the most common forms of private equity exit continue to be secondary sales to other financial sponsors and trade sales to strategic buyers. IPOs are less frequent but remain an option for larger, growth-oriented companies, especially those in sectors like tech, life sciences or infrastructure.

However, continuation vehicles have become increasingly utilised as sponsors seek alternative ways to retain high-performing assets in a depressed M&A environment.

Dual-Track Processes Used Selectively

Dual-track exit processes are rare, but may be used occasionally, particularly in high-value or high-visibility assets. Also given the depressed Danish IPO market (though dual-track sometimes pursue an IPO in other jurisdictions) and the resource-intensive nature of such processes, they are rarely used.

Triple-Track Structures Are Rare

Triple-track exits, which combine an IPO process, a trade/sponsor sale and a refinancing or recapitalisation option, are rare in the Danish market. They are more likely to be seen in cross-border or regional exits led by international sponsors with scalable assets.

Reinvestment or Roll-Over

Private equity sellers do not typically roll over equity upon exit, unless the exit is structured as a partial sale or merger where the sponsor retains a minority position. In some sponsor-to-sponsor transactions, especially at the upper end of the market, the selling fund may retain a small stake or reinvest alongside the new sponsor to align interests or support future value creation.

Standard Features of Danish Private Equity Structures

Drag-along and tag-along rights are standard features in Danish private equity ownership structures. They serve to ensure exit flexibility for the majority investor and protect minority shareholders, including management and co-investors.

Typical Thresholds

Drag-along rights are typically structured to ensure that the private-equity fund controls the exit – also in a (large) minority investment. In situations with a strong founder having a high ownership stake, a qualified majority may be negotiated.

Tag-along rights are generally granted to all minority shareholders and are triggered when the majority sells a controlling stake, usually defined as more than 50%.

Differences Between Management and Institutional Co-Investors

Institutional co-investors may negotiate stronger tag-along protections and may also seek approval rights over certain drag-along sales, particularly if they are significant minority holders. Management shareholders, by contrast, typically have more limited influence and are bound by standard drag provisions and may further be required to accept restrictive covenants and/or reinvestment in connection with a sale.

Lock-Up Arrangements Are Market Standard

In Danish IPOs involving private equity sellers, it is customary for the sponsor to be subject to a lock-up period, typically ranging from 180 to 360 days post-listing. The exact duration depends on market conditions, size of the offering and underwriter requirements. The lock-up is often staggered for different shareholder groups.

Relationship Agreements Ensure Arm’s Length Governance

Relationship agreements are usually not entered into between the sponsor and the listed company.

Other Particularities in PE-Led IPOs

Private equity-led IPOs in Denmark often involve:

• reorganisation of the holding structure prior to listing;
• management incentive adjustments, including IPO-vesting or conversion of sweet equity;
• inclusion of cornerstone investors to anchor the book-building process; and
• greater emphasis on exit readiness, including audited carve-out financials and formal board governance upgrades.