deal-structures
A share purchase agreement is the definitive contract for buying the shares of a company. The buyer steps into the legal entity — assets, contracts and liabilities included — on the terms set out in the SPA.
Under a share purchase agreement the object of sale is the shares (or quotas). Corporate contracts, employees and licences usually stay in place. So do hidden liabilities. That is why legal due diligence, tax due diligence and a robust warranty package sit at the centre of an SPA, and why some buyers still prefer an asset purchase agreement.
Accounting for the completed business combination, once control transfers, is a separate regime under IFRS 3. The SPA is the private contract; IFRS 3 is how the buyer later books it.
Price and purchase price adjustment (locked box or completion accounts), leakage, conditions precedent, pre-closing covenants, representations and warranties, indemnities, escrow or W&I insurance, earnout, restrictive covenants, and dispute resolution. IBA model materials are a common reference for cross-border private deals.
Equity value implied at €20m on a cash-free/debt-free, normalised WC basis. Locked-box date 31 March. Leakage covenant. €1.5m escrow for a specific environmental indemnity. Signing in June, closing in August after merger-control clearance. Between signing and closing the seller must operate in the ordinary course.
Buyers want a wide warranty sweep, a low materiality threshold and a long survival. Sellers want a locked box, W&I insurance to cap residual risk, and a clean break. Private equity sellers in Europe have pushed locked box plus W&I as a package for exactly that reason.
Drafting locked-box leakage so loosely that ordinary dividends sneak through. Mismatching the EBITDA definition in an earnout with the QoE definition. Forgetting drag/tag and minority holders who never signed the SPA.
An SPA cannot invent consent that a customer contract refuses. It also cannot make an overpaid multiple into a good investment.
The SPA should be the legal wrapper around numbers the parties already share: deal-basis earnings, net debt, WC, and known specific risks. When those numbers still live in advisor email, the mark-up becomes archaeology. Practitioners’ shorthand is on the SPA page.