Merriam-Webster`s definition is “an agreement, combination or group (from a company) that has been formed to undertake a business that exceeds a member`s resources.” The word is Latin, derived from “con” (together) and “exit” (Fate). In commercial industries that depend on technological development, a consortium can be a way to share the costs of research and development among several companies that would benefit from the resulting technology. Consortia can also be commercial. Airbus, which was originally a consortium of European aerospace producers, would be an example. It eventually became a standalone company, Airbus, SAS. In addition to the obvious tax structuring considerations, which can be particularly difficult to put in place in a consortium to align with a mix of private equity, U.S.-based strategic members and not based in the United States, it is appropriate, if there is an EEA link with the consortium, to consider at an early stage whether or not the consortium vehicle will be an alternative investment fund within the meaning of the AIFMD. and are therefore subject to continuous authorisation and authorization. The analysis of a structure is highly factual and generally deals with the question of whether there is a collective investment company (or whether the consortium members have daily operational activities) that has raised capital (instead of bringing together the consortium members on their own initiative to form the capital supply consortium). The approach taken by regulators throughout the EEA may vary; While the ACF has provided useful guidelines for joint ventures, consortia involving members or co-investments from the Netherlands, Ireland, France, Germany and Denmark should pay particular attention. Bidders in a competitive bidding process must be able to move quickly and decisively, which must avoid cumbersome decision-making processes to allow for a consistent and agile approach to the seller. In private equity-managed consortia, one or two major sponsors are often empowered to make almost all decisions on behalf of the consortium and create a single priority for legal and commercial diligence. Unleaded, investors risk finding themselves in a dead end or controlling sellers with an overloaded trading table and overlapping due diligence processes.

The diversity and combination of parties that meet in consortia is no longer limited to traditional club agreements, strategic joint ventures or passive co-investment paradigms. Financial investors are increasingly willing to play a large number of roles, from the lead investor to the co-sponsor, the passive investor or co-investor, depending on the type of transaction, their own resources and know-how and the orientation of interests with other members of the group. The recent $4.8 billion acquisition of Merlin Entertainment was considered by Kirkbi, a strategic family investment firm, to be an equal partner with Blackstone and the Canada Pension Plan Investment Board. Each consortium member`s exposure to transaction costs and expenses should be determined quickly. In the case of a successful transaction, all costs should be borne by the consortium`s new vehicle, but if not – and if a demolition or pause fee is not payable by the seller – the costs must be divided between the consortium. This is usually done in proportion to interim capital commitments, with all withdrawn investors having to be subject to a tax and up to the date of withdrawal if the transaction fails.

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