Three stages in drafting M&A SPA


I learn drafting sale and purchase agreement (SPA) for M&A in the “traditional” manner.

This is probably how instructions are given to associates when they are asked to draft SPA.

We are acting for ABC who wants to buy/sell shares in XYZ Company.

[Some briefing on the transaction.]

Please draft the SPA.

Here are a few precedents for you to work on. Now, go and draft.

With some experience of drafting SPAs and reviewing drafts prepared by counterparties’ lawyers, I can see that SPAs for M&A are structured in certain manner.

I like to think of the provisions in a SPA through the following three stages and draft the seller’s and purchaser’s obligations according to these three stages.

The following are the usual obligations of the parties during these three stages:

1. The period from the execution of the SPA until completion of the sale and purchase (Completion)

• Fulfilment of conditions precedent by the seller and the purchaser.

The conditions precedent typically include getting the necessary approvals from the relevant authorities, consents from financiers and third parties (if required) and rectification of material issues discovered during due diligence on the target company.

• There is usually a list of the seller’s obligations during this period to ensure the business and affairs of the target company is conducted in certain manner to protect the value of the target company.

2. During Completion

• Delivery of share transfer forms and share certificates by the seller to the purchaser.

• Passing of directors’ resolution of the target company to approve the transfer of shares from the seller to the purchaser.

• Payment of purchase price by the purchaser to the seller.

3. After Completion

• Discharge of guarantee given by the seller in favour of the financiers of the target company if the seller ceases to be a shareholder of the target company after Completion. In such instance, the purchaser typically provides the guarantee.

• Payment of retention sum (if any) from the purchase consideration.

What is your approach to drafting SPA for M&A transaction?


First posted on Linkedin on 15 December 2021.

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