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Sale & Purchase Agreements - The Commercial Issues - ASPAC

Negotiating the contentious topics in SPAs

Breathtaking dusk view of Singapores majestic cityscape

A one-day course

SPA structure & interpretation issues

  • The skeleton structure of the SPA: overview
  • The general approach to the interpretation of contracts
    • UK vs Europe
  • Case Review: Approach in England: Arnold v Britton
  • Case Review: Approach in Civil jurisdictions: the 'Haviltex' principles in the Lundiform judgement (Holland)
  • The spectrum of “endeavours/efforts” – Best vs Reasonable other variants
  • Dispute Resolution
  • Jurisdiction & Choice of law
  • Title to the (sale) the shares
    • Full vs Limited title guarantee – ramifications 

Calculating the price: The equity bridge (cash-free /debt-free)

  • The cash-free - debt-free approach (the equity bridge)
  • What does ‘cash-free/ debt-free’ mean in practice?
    • Defining Cash (what is included in ‘cash’)?
    • Defining Debt – what is included?
    • Potential problem issues with capital expenditure (Capex)
  • Calculating the working capital Target or PEG
    • Setting the working capital Target or PEG
    • What is the ‘right’ Target? – normalised, average, core
    • Defining working capital
  • Practical tips on how the parties can minimise disputes in the SPA re definitions of Cash, Debt and Working Capital
  • Other adjustments to the price – warranties & indemnity claims
  • Comparing Completion Accounts to Locked Box 

Completion Accounts approach

  • Key milestones in deriving the "Completion Accounts"
  • What are Completion Accounts
    • No IFRS or GAAP definition of Completion Accounts
    • What should the Completion Accounts comprise
  • What are the key issues when Completion Accounts are used
    • Form of the Completion Accounts
    • The accounting conventions and definitions used to compile the Completion Accounts
    • The hierarchy of accounts
    • Why and how it matters
    • Sellers vs buyers approach
    • IFRS/GAAP 'override'
    • The process for compiling the Completion Accounts (who is responsible)
    • Paying the purchase price – initial and the ‘true up’
    • Issue in split Exchange and Completion (i.e. signing and financial close)
    • Access for the seller post Completion
    • Dealing with delays in setting the Completion Accounts
    • Protection for the buyer
  • Main areas of dispute
  • Wrong hierarchy of accounts
  • Poor / inadequate definitions
  • Ambiguous accounting policies
  • Poor access for seller
  • Tips on how to minimise/ eliminate potential for disputes
  • Case Review: Mehiel (Delaware)
  • Case Review: Shafi v Rutherford 

Locked Box approach

  • Review Locked Box timeline and pros & cons
  • Which 'Accounts" are used - management, audited other?
  • Review “typical” Locked Box clause
  • Dealing with Permitted leakage – how to draft buyer protection
  • Problem when the deal includes a value accrual of Cash/ EBITDA ‘ticker’
  • Other areas of potential problem areas
  • Main issues with the “Accounts” Warranty
  • Buttressing the ‘Accounts’ warranty to mitigate Locked Box problems

Deals based on Net Asset Value

  • Which sectors use NAV
  • Potential problem areas
  • Inventory - what is 'cost' and WIP?
  • The definition of NAV
  • Potential problem areas with Receivables
  • Long-term contracts
  • Valuation and impairment of Long-term assets 

Representations & misrepresentations

  • Representations vs warranties vs indemnities
    • Representations vs “term” (of contract)
  • Types of misrepresentations & their remedies
    • Fraudulent vs negligent vs innocent misrepresentations
  • Impact of “Entire Agreement” clause – 3 key aspects
    • Scope of entire agreement– can it cover ‘terms implied by custom, Statute, business efficacy'
    • Role of Non-reliance statement
    • How effective is “exclusive remedies” carve-out (what about fraud?)
    • what about Rectification?


  • Warranties – rationale & purpose
  • Warranties and interaction with the Disclosure process
  • The main areas of warranty protection
    • why ESG warranties matter
  • Interaction of the Tax Covenant with the Tax Warranties (UK)
  • Calculating damages in Warranty claims
    • Difference in the market value of the shares with and without the breach
    • What is Market Value
    • Case Review: review Cardamon Case
    • UK vs Civil law approach
    • Difference between different types of damages
    • Case Review: ADT Case
  • “Boxed” Warranties – risks for buyers
  • Warranties on an “Indemnity” basis
  • Who provides the warranties – problem areas & how to mitigate them
    • Issues with multiple sellers, limits on liability
    • Sales by “Shell’ companies
    • Private equity issues - managers (not owners) 


  • General vs specific disclosure
  • What is “Fair” disclosure
    • Case Review: New Hearts approach
  • The disclosure “standard” impact post
    • Case Review: Infiniteland Case
  • Position in civil law
  • How can the buyer react to “aggressive” disclosure
  • Impact of a failure to disclose – civil and criminal aspects 


  • Purpose of & rationale for Indemnities
  • Indemnification as the exclusive remedy (carve-outs)
  • Main areas of Indemnity coverage
    • Environmental
    • Product liability
    • Litigation (esp. IPR)
  • Potential problem areas with indemnities
    • Case Review: Padre Island Case
    • Case Review: “Eurus’ Case 

Limitations on liability under the SPA

  • Financial caps on Sellers’ liability - is there a ‘market’ standard?
    • Overall cap on liability – does it cover all claims
      • Are there differential caps for differing types of claims
    • Dealing with deferred consideration
    • Proportional limits for each seller (contribution agreements)
    • De minimis caps for individual claims
      • What happens if these exceed a high level?
    • Tipping Basket vs Deductible basket – what’s market?
  • Time limits (what do they apply to)
    • Notifying claims
    • Bringing claims (what does ‘served’ mean?)
    • Differing time periods for differing types of claims (e.g. tax, environment, capacity/title)
  • Buyer’s knowledge
    • Matters ‘disclosed’ in the ‘disclosure bundle’ / data room
    • Buyer’s knowledge from other sources
    • Case Review: “Eurocopy vs Infiniteland Cases
  • Sellers’ Knowledge (‘Awareness’ carve-outs)
    • Rationale for carve-out
    • What constitutes the seller’s “knowledge” – actual vs constructive vs imputed
    • What is the seller’s optimum position
    • How should buyers respond
    • Sellers ‘deemed’ knowledge
    • Seller obliged to make due and careful enquiry
    • Case Review: William Sindall case
    • Case Review: Triumph Controls case
  • Other limits
    • Provisions in the ‘Accounts’ - Case Review: Brim Holdings Case (Delaware)
    • Recovery from other sources (insurance/ Third parties)
    • Contingent liabilities
    • Changes in Law
    • Changes in Accounting policies post completion
    • Acts by the buyer (post completion) or Acts on buyer’s instructions
    • Disregard post-Completion actions (by the buyer)
  • Case Review: Teoco case
  • Case Review: Zaygo case
  • Retentions and Escrow accounts
    • Who gets the interest?
    • What happens to the Retention/Escrow if a claim is pending at termination of the Retention/Escrow period
  • Warranty insurance – a viable solution?
    • Scope of issues covered
    • Pricing metrics
    • Buyer vs seller policies – key differences 

Earn-outs – A Tool for Value Arbitrage

  • Anatomy of an earn-out
    • Time element
    • The financial benchmark
    • Other milestones
  • Key negotiation issues
    • Calculating the financial benchmark (e.g. EBITDA)
  • Dealing with early termination of the earn-out
  • Handling vendors who leave ”early” 

Main Issues to consider split Exchange & Completion

  • Right to Termination clause
    • Conditions to Completion
    • Matters between Exchange & Completion
    • Role of “material”
    • Impact on Warranties – repeat all, some or none at Completion?
  • MAC/MAE clauses
    • What is a MAC
    • Review WPP - Tempus
    • Is there a ‘market’ approach
    • Issues for the seller
    • Issues for the buyer

Our trainer is a consultant, public speaker and author with expertise in private equity, debt advisory, restructuring and infrastructure. He is a Senior Advisor to KPMG Finland and a Senior Consultant to Grant Thornton UK. He is the Programme Director at the City Business School, London, for Infrastructure Finance for the M. Sc. programme in Business Administration and Finance.

Training programmes are provided to a wide range of blue-chip clients in Europe, Africa, the Middle and Far East, North America and Australasia. In-house clients include banks (BNP Paribas, Société Générale, ING, Barclays Capital, Bank of China, RBS, SEB); lawyers (Baker & McKenzie, Skadden Arps, Sullivan & Cromwell, Cadwalader, Latham & Watkins, Weil, White & Case); advisory firms (Lazard, PWC, M&A International, KPMG, EY, Deloitte); PE firms (Cinven, Advent, Barings Asia, Waterland); corporates (Siemens, Airbus, Turkcell, Candy Crush, Gunvor, Statkraft) and governmental bodies (the UKLA, the EBRD, the ECGD, Omani Oil Corp.)

He qualified in South Africa both as a Chartered Accountant, with Deloitte and as a lawyer with Hofmeyr where he was involved in structuring many high-profile project financings including BMW 3 Series, Ford Sierra, GM, Sappi and Mondi.

When he moved to London and joined Lazard Brothers as a corporate finance executive he was involved in a wide range of public and private transactions. Subsequently, he joined Hoare Govett as an assistant director where he acted as an advisor to smaller listed companies and was involved in several syndicated Euro-Equity Initial Public Offerings.

In 1991 he joined ABN Amro’s cross-border M&A team before being transferred to MeesPierson Corporate Finance as a Director in Cross-Border M&A where he was also involved in a number of deals in Central Europe. During this time, he was a member of the EU-PHARE programme and advised the Estonian government on its privatisation programme.

He is a fellow of the Institute of Chartered Accountants in England & Wales and a member of the South African Institute of Chartered Accountants. He completed a BA and an LLB at the University of Natal and a B. Compt. (Hons) at UNISA.

SPA structure & layout – the globalisation of M&A has led to a formulaic approach to the structure of SPAs across Europe and parts of Asia Pacific. The programme includes an appendix setting out the main clause headings in the SPA.

Interpretation of contracts – there is a significant difference in approach between English law and civil systems. The programme highlights these and the potential commercial ramifications.

Understanding & documenting the Equity Bridge (reconciling Enterprise to Equity Value) - the ‘Cash free / Debt free‘ concept seems simple enough but the devil is in the detail. The programme discusses the nuances of ‘debt’ and ‘surplus cash’ and guides you on how to define these concepts to avoid disputes pre and post-closing.

The working capital adjustment – deriving working capital (and the Target/PEG) is often even more contentious than ‘debt/cash’ as there is no standard definition and it is up to the parties to agree on its components. The course provides guidance on how to approach and document working capital in the SPA.

Completion Accounts – there is no standard accounting definition on what constitutes ‘Completion Accounts’; the programme identifies how to ensure the SPA should approach this issue and also the potential pitfalls in using Completion Accounts.

Locked Box – has become widely used in Europe (& some parts of Asia Pacific) but entails greater risk for buyers (and sellers too) but there remains a gap between theory and practice so far as the value accrual is structured. The course identifies the main risks of using a Locked Box and how these can be mitigated in the SPA particularly so far as the value accrual is concerned.

Representations, Warranties, Disclosure and Warranty Insurance – These aspects need to be considered together particularly since, in English law, the remedies for misrepresentations are more punitive than those for warranties unless care is taken in drafting. The programme provides tips on how to avoid falling into this trap. Warranties are a contentious area and the programme covers the main areas of risk, managing counterparty risk with multiple sellers and ‘shell’ sellers, inter-action with disclosures and the appropriate disclosure ‘standard’ to qualify the warranties. Last, damages under warranty claims are calculated differently in English law vs. civil law. The increasing role of warranty insurance is also covered.

Limitations on Seller’s liability – this is equally contentious since it impacts the warranties, indemnities and the tax covenant. The programme considers these issues from both buyer and seller-friendly positions, especially the debatable areas of exceptions based on the seller’s ‘awareness’ and the buyer’s own ‘knowledge’ (sandbagging and anti-sandbagging). The training reviews the various financial caps and the ‘market’ standards that have evolved in Europe.

Earn-outs – The programme provides practical guidance on how to devise appropriate benchmarks, milestone payments and ways of mitigating the risks of meeting benchmarks. It also identifies the pitfalls (for buyers and sellers) which help mitigate disputes.

Split Exchange & Completion – the programme discusses the thorny issues that arise when completion is delayed and provides guidance on how to manage buyer’s desire for updated warranties and how sellers should respond.

  • Our sale and purchase agreements course trainer is qualified as a solicitor and has vast experience in drafting legal documentation.
  • Having trained as a Chartered Accountant with Deloitte he has a sound understanding of the key financial issues in SPAs.
  • He has experience in over 40 years of M&A covering a wide range of regions including the UK, Europe, the US, Asia and Africa.
  • The trainer is still active in the M&A market through his various consultancies.
  • He has been involved in over 20 earn-outs.
  • Through presenting to clients involved in different aspects of M&A (advisers, transaction services/DD, Investment Banks and lawyers) he gains exposure to different aspects of the SPAs.

This sale and purchase agreements course is a ‘must know’ for professionals involved directly in documenting private M&A, including:

  • Commercial lawyers
  • In-house M&A lawyers
  • Corporate finance advisors requiring insight into legal issues
  • Private Equity practitioners
  • Owner/managers
  • Providers of warranty insurance
  • Lawyers in banking (who may need to review the SPA)

And a ‘nice to know’ for:

  • The skeleton structure of the SPA: overview
  • Corporate finance advisors;
  • Accountants providing due diligence/VDD;
  • Private wealth advisors involved in M&A
  • Lenders/providers of debt finance for acquisitions;
  • Professionals in strategy or business development;
  • Professionals providing support services to M&A;
  • Fund of fund professionals;
  • Marketing teams;
  • HR/People management;
  • Directors on corporate boards (not in M&A)

Sale and Purchase agreements lie at the heart of any private acquisition. Our sale and purchase agreements training course focuses on the key areas of the SPA. In Completion accounts, the standard definitions of cash, debt and working capital adopt a very broad-brush approach paving the way for disputes post-completion. Where a Locked Box is used, the parties face different issues; particularly the definitions of leakage and the how-to draft a value accrual (of cash or profits which is increasingly used).

Warranty claims present another area of potential difficulty, particularly how and when the measure of damages is calculated and the market is considering ways to enhance the buyer’s recovery for damages. In the UK, Infiniteland Case Review has broken new ground in terms of the disclosure standard and what constitutes the buyer’s ‘knowledge’. The course also considers the areas where civil law differs in its approach; for example, interpretation and also the approach to damages for warranties and the approach to disclosure.

Split Exchange and Completion are another potentially controversial area concerning which warranties need repeating and how that dovetails with disclosure and the MAC.

Reference is made during the course to recent or relevant leading Case Reviews. Please note that this course covers material that is also covered in the Advanced Negotiation Issues in M&A course.

  • Very helpful training. the trainer are the content were very well structured.
  • Applied knowledge through numerous real world examples as well as highlighting common mistakes.
  • I think the trainer did an excellent job. Great examples/case studies but most notably his responsiveness to questions and remarks was excellent. He's got a wealth of experience to share and he does.

Have this course presented In-House

  • On a date, time and in a location of your choice
  • Topics expanded or deleted to your bespoke requirements

Have this course pre-recorded

  • Full course recording edited exclusively for your company
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