Contracts and Closing Mechanisms
In any transaction, the Sale and Purchase Agreement (SPA) represents the outcome of key commercial and pricing negotiations. Purchasers and sellers are becoming increasingly sophisticated in seeking to exploit the potential value to be gained through the negotiation and execution of the SPA.
Our dedicated team provides support from pre-deal work through to post-closing support:
- Pre-deal: We can help you identify and consider likely negotiation points around the SPA and key financial targets.
- During the deal: We can advise you in your negotiations and the related contract wording to ensure the financial and tax aspects of the SPA reflect your commercial intentions.
- Post-closing: We can help you in protecting or enhancing value through the SPA closing mechanism, earn out adjustments, warranty claims and disputes.
Delivering value to you
In a complicated and fast moving area, how do you know if you need assistance with the negotiation of your sale and purchase agreement either as a buyer or a seller? Asking yourself the following questions will help:
- Which is best for me, a Locked Box or Closing Accounts mechanism?
- What are the key financial negotiation points the other party is likely to raise?
- What evidence and arguments do I need to prepare in order to rebut the other party’s position?
- What financial targets and accounting requirements should I be putting into my SPA?
- Does the Closing Accounts mechanism expose me to a risk of significant value erosion?
- How do I structure the proposed earn out to meet my commercial objectives?
How we can support you
- We can assist you in considering the adjustments to be made between Enterprise Value and Equity Value and in formulating the arguments and counter-arguments required to justify your proposed approach.
- We can advise you in your determination of the appropriate financial benchmarks (or appropriate adjustments to price in the case of a 'locked box' (fixed price) mechanism) and related arguments, for the purposes of price negotiation and drafting the SPA.
- We can advise you in your analysis of the working capital requirements of the business with a view to you determining the normalized working capital for the purposes of your negotiation of the SPA.
- We can work with you and the financial due diligence team to assist you in mitigating the risks identified during the due diligence phase.
- We can advise you in your negotiations of the accounting aspects of the SPA, including commentary on the pricing mechanism, relevant representations and warranties, other accounting related clauses of the SPA and any dispute resolution mechanisms related to the purchase price adjustment.
- We can provide you with a market perspective on the key financial value levers, terms and conditions gained through the review of hundreds of sale and purchase agreements.