Increased Recovery and Strategic Focus

Private equity (PE) and M&A activity in Denmark was subdued through much of 2024 but showed meaningful recovery into 2025, with a significant increase in deal volumes. This positive momentum has carried into the first half of 2026. Investors have, however, remained selective and continue to focus primarily on resilient businesses with solid fundamentals, but the mood has shifted from cautious to cautiously optimistic.

The Danish M&A market continues to be dominated by private transactions, with very few public deals seen in the last 12 months. Deal terms are generally more buyer-friendly, often involving extended diligence periods, earn-outs, vendor financing and reinvestment. There is also a trend towards bilateral processes rather than large auctions with wide bidder fields. In those auction processes that do go live, terms typically remain seller-friendly. Buy-and-build strategies have been a particular driver of activity, with PE-backed platforms actively pursuing add-on acquisitions across a wide range of sectors, with business services and consultancy being key drivers.

Private equity activity in Denmark showed meaningful recovery in 2025 and into the first quarter of 2026. After a period of below-expectation activity in 2024, momentum has built progressively. In the first quarter of 2026, PE activity accounted for almost half of all transactions, many of which were buy-and-build transactions, confirming that add-on acquisitions and platform build-up remain the dominant PE strategy in the Danish market.

Despite meaningful recovery, general geopolitical uncertainty – including the impact of tariffs, shifting global trade patterns and interest fluctuation – has created continued volatility. Sponsors remain risk-averse and conservative in valuations, which continues to drive a valuation gap between sellers and buyers that was expected by many to emerge in 2025 as interest rates declined. Combined with a more cautious approach among sponsors in larger transactions and more competition from strategic bidders, these conditions have meant that activity has been concentrated in the small and mid-market segment and in add-on acquisitions, mainly through bilateral processes. Disruption from AI on various sectors are further contributors to risk aversion.

Sector Trends: Tech, Business Services, Healthcare and Defence

Technology remained the clearest theme for private equity, with an emphasis on vertical software, IT services scale platforms and digital transformation exposure. Additional drivers are cloud modernisation, cybersecurity, data infrastructure and AI-enabled software/services.

Business services benefit from fragmentation, recurring customer relationships, low capital intensity and clear buy-and-build logic. The sector has become a natural PE consolidation theme, with fragmented markets, scarce specialist talent and recurring digital transformation demands making the sector well suited to platform-building.

Healthcare combines structural demand, resilience, innovation and international scalability. The sector is moving beyond classic services' consolidation and into pharma services, diagnostics, radiopharmaceuticals and enabling technologies, where Denmark has internationally relevant niches.

The defence and security sector has emerged as an increasingly prominent area of PE interest, reflecting elevated European defence spending driven by geopolitical tensions and NATO commitments. Investors are targeting Danish companies in defence technology, cybersecurity, advanced manufacturing, and dual-use solutions. Actual deal-making momentum has been building on the back of structural spending growth and increased emphasis on technological sovereignty.

Macroeconomic and Geopolitical Influences

Geopolitical tensions, fluctuating interest rates, tariffs and supply chain disruptions continue to affect private equity activity. While Denmark’s macro backdrop is relatively supportive compared with many other European markets, it still does not have a high growth appeal, but rather predictability in macroeconomic factors: low inflation, strong employment, high institutional quality. Denmark remains exposed to geopolitical uncertainty, trade conflicts and energy price risks.

NIS2 Cybersecurity Obligations

The Danish Network and Information Security Directive (NIS2) Act entered into force on 1 July 2025, implementing the EU NIS2 Directive and introducing mandatory cybersecurity governance obligations, including board-level approval and monitoring of risk-management measures. The NIS2 is particularly relevant in PE-active sectors such as IT services, digital infrastructure, healthcare, medtech, energy, infrastructure, logistics and transport. For in-scope targets, diligence should cover scope assessment, technical and organisational security measures.

New Section 7P Tax Rules: Impact on Incentive Programmes

With effect from 1 July 2026, Denmark expanded the favourable tax treatment under Section 7P of the Danish Tax Assessment Act for equity-based compensation. The reform is particularly relevant for Management Incentive Plans (MIPs) in PE-backed platforms, as it broadens the qualifying start-up criteria to companies with up to DKK200 million in turnover and balance sheet total, up to 150 employees and up to ten years since the first commercial sale. It also removes the previous 50% salary cap, replacing it with a more flexible minimum base salary requirement, and removes the requirement to document the value of grants at issuance.

These changes allow sponsors to structure larger equity grants for a broader employee group across qualifying platform companies, while reducing the administrative burden.

EU Omnibus Package: Impact on ESG and Sustainability Diligence

The EU’s Omnibus I simplification package has narrowed and postponed parts of the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) regimes, meaning that many mid-market portfolio companies previously expected to fall within mandatory sustainability reporting or due diligence obligations may no longer be in scope.

AIFMD

The revised Alternative Investment Fund Managers Directive (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 Limited Partnerships – Kommanditselskaber (K/S), which provide tax transparency and flexibility in profit allocation.

Looking Ahead: Government Reform Programme

The new Danish coalition government, formed in June 2026, has signalled several measures relevant to the private equity ecosystem. On taxation, the government proposes to reduce the corporate income tax rate by three percentage points over three years, from 22% to 19% and to raise the threshold for the lower 27% share income tax rate to DKK110,000. These changes improve after-tax returns on PE investments in Danish portfolio companies and strengthen the economics of equity participation for Danish-resident management teams.

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.

A notable development in 2025 was the DCCA’s active use of its call-in power, exercised in two separate cases to require notification of transactions that did not meet the statutory turnover thresholds. This has created a practical need for early merger control analysis, even in acquisitions involving smaller targets, particularly where the parties’ combined annual Danish turnover is at least DKK50 million and the Authority considers that competition concerns may arise. Private equity sponsors operating buy-and-build strategies should factor this risk into their acquisition planning.

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.

The Danish Business Authority also has call-in powers, allowing it potentially to block or impose conditions on foreign investments in non-notifiable sectors if they pose a risk to national security or public order. 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 anti-bribery or sanctions sphere in the past 12 months, but enforcement risk and compliance expectations remain high, especially for cross-border sponsors.

Comprehensive but Targeted Legal Due Diligence

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, and regulatory compliance.

Key Focus Areas

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

• employment and incentive structures;
• regulatory compliance;
• litigation and contingent liabilities;
• data protection and IT; and
• intellectual property rights.

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 a report in the context of W&I insurance.

Reliance and Access

It is increasingly common for shortlisted bidders or the ultimate buyer to receive reliance on the legal VDD report. A notable development is the advent of top-up due diligence in lieu of full buy-side diligence. In a top-up due diligence, the buyer supplements an existing vendor due diligence report with targeted additional enquiries, both to confirm material findings and to cover any period from the cut-off date of the vendor material. This is increasingly accepted by W&I insurers as a sufficient basis for coverage, reflecting a broader market trend towards greater process flexibility. This provides a more seamless bidder experience when a full-scale buy-side due diligence does not have to be completed to obtain coverage under W&I insurance.

The use of W&I insurance in Danish private equity transactions has contributed to a more structured approach to due diligence. To obtain broad coverage and limit exclusions, insurers generally require that key risk areas be 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 provide cover and the use of locked-box pricing mechanisms.

Acquisitions via BidCo Structures

Private equity-backed acquisitions in Denmark are typically structured through a Danish or foreign special-purpose vehicle (SPV/BidCo). The bidding company (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 top company (TopCo) will then be owned by one or more fund entities, co-investors and 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  does not usually become a direct party to the acquisition or sale documentation. Instead, the fund is typically represented indirectly through its ownership of the 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 (a General Partner – GP) to provide equity commitment letters or support letters to sellers or lenders, offering additional contractual certainty, see 5.3 Funding Structure of Private Equity Transactions.

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 certain funds which, in addition to an 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 the funding structure, as insurance proceeds are often factored into coverage and security packages from both equity and debt providers.

Consortia and Club Deals are Limited but Possible

Transactions involving a consortium of private equity sponsors are mostly seen in large, cross-border transactions where deal size or sector expertise calls for shared exposure. The Danish market is dominated by small and 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 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. 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. Any 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.

Expert Determination for Completion Accounts

In Danish private equity transactions, it is 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.

Pricing disputes are generally less common in locked box-mechanisms, due to the fixed nature of the purchase price. Here, potential disagreements typically relate to leakage provisions.

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. Similarly, shareholder approval on the buyer side is uncommon, unless structurally necessary (eg, listed buyer entities or complex fund structures).

Material adverse change (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. Danish case law is limited in respect of the application of an MAE provision, thus when they are used (typically in cross-border transactions), it is recommended to specify what actually constitutes a material adverse event (eg, [x]% of revenue drop, production facility shutdown, employee strike, etc) rather than relying on courts or arbitration.

Conditions relating to third-party consents (such as key contracts with change-of-control clauses) are very rare to avoid “depositing the deal” with a third party. In practice, parties often manage such commercial risks through pre-signing co-ordination or post-signing covenants rather than as formal conditions.

In summary, the use of conditionality in Danish private equity deals is generally limited.

“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 foreign direct investment (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 add-on or 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 any 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 longstop periods may be agreed and can be between more than 12-24 months. The right to extensions may also be pre-agreed if specific conditions are progressing but not yet fulfilled.

Private Equity Sellers aim for Clean Exits

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 whether 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 evaluate 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 as well as business warranties.

Specific indemnities are rarely provided by private equity sellers, unless there are known risks that cannot be insured or ring-fenced otherwise. 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 up to 20-40% of the purchase price, and the liability period for business warranties is typically 24 months and for fundamental warranties 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 or 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 standard in Danish PE transactions and generally covers business warranties, tax and – depending on negotiation outcomes – fundamental warranties. As noted in 6.9 Warranty and Indemnity Protection, in competitive processes with a PE seller there will typically be no residual seller liability; all warranty claims are 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:

• 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; and
• 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 Offers, 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).

A notable recent illustration of the execution risks inherent in the Danish public-to-private market is the 2025 attempted takeover of Bavarian Nordic A/S. A PE consortium – Permira and Nordic Capital – launched a recommended voluntary offer at an initial minimum acceptance threshold of 90% of the share capital and voting rights. A major shareholder publicly opposed the offer with a stake sufficient to frustrate the minimum acceptance condition. The offer-acceptance threshold was adjusted downwards twice through the offer period – first to 75% and subsequently to 66.67% – but ultimately lapsed without the requisite level of shareholder acceptance being achieved. The episode reinforces a fundamental lesson for PE-backed bidders pursuing full control and delisting in this market. Early and substantive pre-launch engagement with anchor shareholders is essential, and irrevocable undertakings should be sought prior to the announcement of the takeover where a subsequent squeeze-out and delisting are the intended outcome. See also 7.7 Irrevocable Commitments.

Role of the Target Company and its Board

In the context of a public-to-private, the target company’s board plays an important role. The target company’s board is under a regulatory obligation to publish a reasoned statement on the offer – covering its assessment of the offer price and strategic rationale, as well as the consequences for shareholders, employees and the company. This statement must be published before the end of the first half of the offer period and is typically released early in that period. The board has no obligation to make a recommendation as such but must issue the statement. The board will ordinarily obtain a so-called “fairness opinion” from an independent financial adviser to support its assessment. The board has an obligation to act independently and in the interest of all shareholders. The board is not under any obligation to organise an auction process and may, on the contrary, undertake exclusivity obligations (subject to a fiduciary out permitting the board to engage with a competing offer assessed to be in the better interest of shareholders).

Relationship or Transaction Agreements

A “announcement agreement” or “business combination agreement” between the bidder and the target will most 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 (33.3%), 50%, two thirds (66.7%) or 90%. These rules apply to all shareholders, including private equity funds, and ensure market transparency in listed companies. Failure to comply with these obligations can result in fines and, in cases of gross or repeated violations, suspension of voting rights.

Attribution and Aggregation for Private Equity Investors

Private equity bidders must assess carefully 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 public takeover offer, bidders are also subject to additional disclosure requirements under the Danish Takeover Order. These include, among others, the identity of the bidder, terms of the offer, how the takeover is to be financed, 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.

New Takeover Order

A new executive order on public takeover offers was adopted in June 2025, addressing clarifications to the pricing rules applicable to mandatory offers, publication requirements for takeover offers, and adjustments arising from the European Single Access Point (ESAP) Regulation. The core framework is substantively unchanged, but the revised rules improve transparency and procedural clarity of the Danish takeover regime.

Mandatory Takeover Offer 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 can be extraordinarily 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 takeover offer can result in fines 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, as was the case in Finnish Sampo’s takeover offer of Topdanmark in 2024.

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-month cooling period during which acquiring additional shares above the offer price will trigger compensation to shareholders who have 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. For mandatory takeover offers, conditions are not permitted, except for those relating to regulatory approvals from authorities.

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 takeover offer must include information on its financing, and the offer cannot be conditional on obtaining that financing.

Deal Security Measures

Bidders may seek deal protection mechanisms such as:

• irrevocable undertakings from major shareholders to accept the offer;
• matching rights or notification rights in the case of competing takeover offers;
• non-solicitation or no-talk clauses with the target (subject to fiduciary out); and
• limited break fees, although 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 and resolve to pay dividends.

Debt Push-Down Mechanisms

Subject to complying with general corporate law, a debt push-down will typically be adopted through the 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 offered in a subsequent compulsory squeeze-out. If the +90% is only obtained subsequently, the process is court-supervised, and minority shareholders may request a formal valuation but must pay for that valuation if not successful in challenging the price offered.

Common in Danish Takeover Practice

Irrevocable commitments/undertakings from principal shareholders are common in Danish public takeover offers, particularly where a private equity bidder needs to demonstrate support to 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 offer preparation and negotiation of the announcement agreement. In some cases, cornerstone shareholders are approached even earlier to assess deal feasibility. The undertakings are often executed shortly before public announcement of the offer.

Nature and Flexibility of the Commitments

Irrevocable undertakings in Denmark take three principal forms, each reflecting a different balance between deal certainty for the bidder and flexibility for the shareholder. Hard commitments are unconditional – the shareholder pre-commits to tender regardless of any competing offer and may not withdraw during the offer period. Offering the greatest deal security, they are typically sought from founders, cornerstone holders and large institutional investors who have already signalled support for the transaction. Soft commitments sit at the other end of the spectrum, giving the shareholder an explicit exit if a superior competing offer emerges. What constitutes a superior offer is itself a negotiated point. The threshold may be set at any price above the initial offer, or only at a price exceeding it by a defined margin, commonly 5–10%. Soft commitments are more readily obtainable but provide materially less certainty to the bidder. Between these two poles, semi-soft commitments have become increasingly common in Danish and broader Nordic practice. The shareholder commits to tender but retains the right to withdraw only if a competing offer exceeds the original price by an agreed premium threshold and the bidder fails to match or top that offer within a specified period, typically five to ten business days. This matching-right mechanism gives the bidder a meaningful opportunity to respond before losing the undertaking, making semi-soft commitments a workable compromise in many transactions.

Widely Used in Danish Private Equity Transactions

Equity incentivisation of the management team is a firmly established feature of Danish private equity transactions. Management Incentive Plans (MIPs) are designed with a dual purpose: to offer a meaningful economic upside and to create robust retention and alignment through leaver and vesting mechanisms that run for the duration of the fund's investment horizon.

Typical Ownership Levels

The management team's collective equity stake typically falls within 5% to 15% of the fully diluted share capital of the holding structure. The precise positioning within that range reflects a number of transaction-specific variables: the size of the business, the extent of existing management's reinvestment (rollover), and the relative bargaining power of the parties.

In founder-led transactions and growth equity deals, management will frequently secure a stake at the higher end of the range, or above it. In classic buyouts, the collective stake more typically falls in the lower part of the interval.

Section 7P Under the Danish Tax Assessment Act (Ligningsloven)

The significant expansion of the Section 7P regime under the Danish Tax Assessment Act (Ligningslovens § 7P) with effect from 1 July 2026 is relevant to MIP structuring in PE-backed platforms, broadening both the pool of qualifying companies and the value of grants that can benefit from favourable tax treatment. See 2.1 Impact of Legal Developments on Funds and Transactions for more details.

Sweet Equity is Commonly Used

In Danish private equity transactions, management participation is structured through a sweet equity model. Management invests in a junior share class with a very limited initial value at issuance, typically issued by the same BidCo or holding company as the sponsor's investment. The model provides a disproportionate upside if predefined value thresholds or exit multiples are achieved, while carrying correspondingly higher downside risk relative to the fund's preferred instruments.

Structure of Sweet Equity

To ensure partial alignment with the fund's position, management typically co-invests a portion of their capital in the same instruments as the fund – the institutional strip. This creates parallel economic exposure across the capital structure alongside the fund.

Use of Preferred Instruments

Preferred equity and shareholder loans are generally reserved for the fund and institutional investors, creating a layered capital structure. The typical split is 80/20 (preferred vs sweet equity) for the fund and 30(40)/70(60) for management. In selected structures, preference share classes or ratchet mechanisms are used to prioritise return of capital and incentivise outperformance through waterfall distributions.

The full capital structure, together with associated vesting, leaver and transfer restriction provisions, is documented comprehensively in the transaction's shareholder agreement.

Vesting is Standard in Danish PE Structures

Vesting provisions are a market standard in Danish PE structures, typically spanning three to five years. Depending on the individual manager's seniority and investment size, vesting may apply to all or part of their sweet equity allocation.

Typical Leaver Classifications

Shareholder agreements draw a clear distinction between leaver categories, each triggering differentiated economic consequences:

• Good leavers: Defined by reference to objective circumstances – death, long-term serious illness, attainment of retirement age, or termination by the company without cause. Market practice recognises two alternative settlement models for good leavers:
1. the manager retains vested equity but is contractually required to offer unvested shares at fair market value; or
2. the manager is required to offer all equity – vested and unvested – at fair market value.
• Bad leavers: Defined as voluntary resignation or termination for cause (including dismissal for material misconduct). The economic consequences are strict: the manager is required to transfer unvested equity at a significant discount, calculated as the lower of entry price and current fair market value. The company or fund may additionally require the manager to transfer vested equity at either entry price or a comparable discount to fair market value.

Customary Restrictive Covenants

Management shareholders in Danish private equity transactions are subject to a standard package of restrictive covenants protecting the commercial interests of the portfolio company and the fund:

• non-compete obligations (commonly 12-24 months post-exit or termination);
• non-solicitation of employees: generally prohibited under Danish law, subject to the narrow statutory exception permitting such obligations for a maximum period of six months from the closing of the relevant transaction;
• non-solicitation of customers or suppliers (commonly 12-24 months post-exit or termination); and
• confidentiality undertakings.

Non-disparagement undertakings are less common but fully permissible – Danish law imposes no statutory restrictions on them.

Form and Documentation

Restrictive covenants are typically anchored in both the manager's employment contract and the shareholder agreement. This dual structure creates two independent enforcement regimes with distinct remedies depending on the nature of the breach.

Enforceability Under Danish Law

Danish courts will uphold restrictive covenants that are proportionate in scope, duration and geographic reach. Non-compete obligations under the employment contract are subject to the Danish Employment Clauses Act, which requires ongoing financial compensation to the departing employee for the full duration of the restriction. Post-termination restraints in shareholder agreements are assessed on proportionality and must be supported by a legitimate business interest. Non-solicitation of employee obligations is generally prohibited under Danish law, save for a narrow statutory exception of up to six months from transaction closing.

Minority Protections are Selectively Granted

Manager shareholders in Danish private equity transactions receive limited minority protection as a starting point – the focus is on economic alignment, not governance control. Expanded rights are reserved for specific circumstances, principally where the manager is also the founder or a significant selling shareholder with meaningful reinvestment into the new structure. Anti-dilution protection is not absolute; the contractual safeguard is typically limited to a fund undertaking not to issue new shares below fair market value, unless for the purpose of future employee incentive programmes.

Veto Rights and Governance Influence

Consent rights over company operations or structural decisions are granted only in exceptional cases, principally where a manager holds a significant equity stake post-closing.

Director appointment rights for management are rare in standard structures and are reserved for founder-led transactions or situations in which management holds a genuinely meaningful minority position.

Exit Rights

Management has no control over the timing or form of the fund’s exit. The fund secures unconditional drag-along rights to enforce a full sale without minority veto, while management is granted market-standard tag-along rights to ensure economic participation on exit.

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 in addition will have certain reserved matters' protection.

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 chairman. 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 that 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. Initial Public Offerings (IPOs) are less frequent but remain an option for larger, growth-oriented companies, especially those in sectors like tech, life sciences or infrastructure.

Continuation vehicles have become increasingly utilised as sponsors seek alternative ways to retain high-performing assets while awaiting improved exit conditions.

Dual-track and triple-track exit processes are rare.

Private equity sellers do not typically roll over equity upon exit.

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 that has 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, the 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.