Complete notes covering Workshop 3 of the University of Law's M&A Elective.
- Price and Payment of Acquisitions
- The Sale and Purchase Agreement
- Price Adjustment Methods (Completion Accounts, Earn-out and Locked-Box Clauses).
The SPA is the key document for the sale and purchase of a company.
It documents the B’s agreement to purchase the shares and pay the relevant price on Closing. The S’s agreement to
sell the target co. The commercial terms of the agreement are likely to be those set out in the Letter of Intent. In
addition, the SPA includes a no. of legal provisions that enable the parties to negotiate key terms of the agreement –
esp. risk allocation between themselves – in this sense it can be viewed as a risk allocation tool.
Structure of the Agreement
The ORDER of the agreement will usually be as follows:
1) parties and date;
2) operative provisions;
3) schedules;
4) execution by the parties.
Þ English is the normal language chosen for cross-border acquisitions, but it can be a concern if local law requires
that specific documents be in a local language/specific format
Þ An international acquisition with multiple jurisdictions will often involve a main agreement and then additional
agreements related to the transaction in each relevant jurisdiction
in each specific jurisdiction the relevant documents will be prepared in the local language and may be
governed by local law
1: Parties
Seller It is important that the SLRs are correctly identified – because they all need to enter into the agreement
to sell the shares in the Target co.
Usually all sellers will give warranties, but there may also be sellers (such as trustee shareholders or
private equity sellers) unwilling to give warranties.
o Therefore, the parties may be described as seller(s), warrantor(s), buyer(s).
In a SHARE SALE it is the shareholders who are the sellers – identity of the SLRs and the shares to be sold
by each of them are set out in Schedule 1, wouldn’t need a schedule if only one seller).
o The Target Co. itself is not a party to the SPA in a share sale – it is simply the asset being
transferred (although it could be – if wanted to enforce certain terms!)
In an ASSET SALE, it is normally the company/sole trader who will be the seller.
Buyer I.e. the person acquiring the shares in the company. The Buyer generally drafts the SPA.
Third parties: Potentially also includes guarantor of the buyer’s obligations
When the parties execute an agreement it will be dated, creating a binding contractual agreement to buy shares
or assets. Note that signing is different from closing. Signing is final execution. Closing is sorting out all the
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