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.
Finding a good deal is hard, but getting it closed the way you want it could be more complex. Now that the due diligence is done, you have a list of commercial and pricing considerations as well as various key risks highlighted in the due diligence reports. How will the sales and purchase agreement (SPA) safeguard your interests against all the risks identified?
Our dedicated SPA team provides expert support at all stages of a transaction from pre-deal work through to post-completion support. Pre-deal, the team assists in the identification and articulation of value issues related to pricing and deal completion mechanics, to assist clients in their SPA negotiations; Post-deal the team assists clients in protecting or generating value through the execution of any SPA completion mechanism.
How we can help you
Before and during transaction
After transaction
Your concern
- How does the purchase price mechanism work?
- Which closing mechanism is suitable - locked box or completion accounts?
- How do I define cash, debt, potential "debt-like" items, working capital, normalisation adjustments to earnings, leakages and permitted leakages?
- How do I ensure all the key risks identified during the due diligence are reflected in the SPA?
- How can I be sure that my proposed adjustments will not compromise the deal?
- How do I account for tax liabilities in relation to open years of assessment?
- How do I ensure the relevant transaction taxes reflect the commercial position and do not result in unintended additional taxes?
- How do I ensure the business is properly run between signing and handover?
- How will the SPA clauses affect my financials post transaction?
Our support
- We can assist you and your advisers 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 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 normalised working capital for the purposes of your negotiation of the SPA.
- We can work with you and your 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. Such advice would include commentary on the pricing mechanism, relevant representations and warranties (if any), any other accounting related clauses of the SPA and any dispute resolution mechanisms related to the purchase price adjustment (including as appropriate, consideration of tax related items).
Completion accounts
- Almost half of all transactions we come across use a Completion Accounts mechanism to adjust the purchase price at completion. Whilst the principles behind completion accounts may appear simple, they are often a source of dispute as parties differ in their interpretation of the SPA or have opposing views about accounting treatment, which affects value.
- We help clients to anticipate and address issues arising from Completion Accounts and achieve a favourable outcome. We can assist our clients with the following:
- planning for the completion accounts process – whether preparing or reviewing,
- preparing analysis to support their position, including assessment of the strengths and weaknesses of arguments presented,
- preparing written submissions on unresolved issues for determination by an independent expert.
- planning for the completion accounts process – whether preparing or reviewing,
Expert determinations
- Expert Determination is the most common form of dispute resolution for post-deal purchase price adjustments and offers several benefits over litigation and arbitration. Speed, lower costs, privacy and the finality of the outcome are among these benefits, while it’s up to the parties themselves to manage the risks. Our specialists are appointed to act as independent expert to resolve transaction disputes through the determination process.
- Whether we’re acting in the expert role or advising a party, we work with you to get the process right from the outset. When advising a party to the dispute, we help clients to:
- appoint an appropriate expert, taking into account the technical accounting, commercial and industry issues at stake,
- develop a strategy based on the information available and the strengths and weaknesses of their position,
- prepare written submissions, review the other party’s submissions and respond to information requests from the independent expert.
- appoint an appropriate expert, taking into account the technical accounting, commercial and industry issues at stake,
Why PwC?
- Dedicated specialist senior team advising on SPAs
- Market leading knowledge of current negotiation trends and practices
- Deep sector expertise ranging from real estate to energy and utilities to retail
- An unrivalled reputation with both our corporate and private equity clients
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