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In the high-stakes world of corporate mergers and acquisitions, the Share Purchase Agreement (SPA) stands out as a pivotal document. As with all contractual negotiations, getting the best terms depends on an intricate balance of legal foresight, commercial strategy, and negotiation skill. Here’s a guide to ensure you walk away with the most favorable terms in your SPA.

Understanding the Share Purchase Agreement

A Share Purchase Agreement is a legal contract between a seller and a buyer where the seller agrees to sell and the buyer agrees to buy the seller’s shares in a company. This type of agreement is central to transactions where ownership of a company is being transferred or sold.

Preliminary Preparations

i. Due Diligence: Before negotiations even begin, conduct thorough due diligence on the target company. Understand its financial health, market position, assets, liabilities, and any potential legal issues.

ii. Clarity on Objectives: Clearly define what you want out of the deal. Are you looking for a complete takeover, a majority stake, or just a strategic investment?

iii. Understand Market Norms: Familiarize yourself with the standard terms and practices in SPAs within the relevant industry and jurisdiction.

Key Negotiation Points

i. Purchase Price: The most obvious negotiation point. The purchase price can be fixed, based on an earn-out, or a combination of both.

  • Tip: Consider external factors like market conditions and future growth potential when negotiating.

ii. Payment Terms: Negotiate how and when the payment will be made. This might include initial down payments, deferred payments, or milestone-based payments.

iii. Representations and Warranties: These are statements made by the seller about the company, its assets, liabilities, operations, and more.

  • Tip: As a buyer, seek broad warranties for a clearer picture of what you’re getting. As a seller, aim to limit these to reduce potential liabilities.

iv. Indemnities: Provisions that outline the compensation process if certain events or conditions adversely affect the value or operations of the purchased shares.

  • Tip: Clearly define the circumstances under which indemnities will be applicable, their duration, and any caps or thresholds.

v. Conditions Precedent: These are conditions that must be satisfied before the completion of the transaction.

  • Tip: Ensure these conditions are realistic, clearly defined, and time-bound.

vi. Non-compete Clauses: These prevent the seller from starting a competing business for a specified period post-sale.

  • Tip: Clearly define the scope, geography, and duration of the non-compete to ensure it’s enforceable.

Common Pitfalls to Avoid

i. Over-Emphasizing Price: While important, the price shouldn’t overshadow other crucial terms like warranties, indemnities, and future commitments.

ii. Ignoring Long-Term Implications: Consider the long-term impacts of the agreement, not just the immediate benefits or drawbacks.

iii. Overlooking Regulatory Aspects: Always consider regulatory implications, especially if the deal involves multiple jurisdictions.

Engaging Experts

i. Legal Counsel: A knowledgeable legal team can guide through the intricacies of the SPA, ensuring you’re protected legally.

ii. Financial Advisors: They can provide valuable insights into the valuation of the shares and advise on the financial implications of the terms being negotiated.

iii. Industry Experts: They offer insights into industry norms, future growth prospects, and potential challenges.


Negotiating a Share Purchase Agreement requires a blend of diligence, foresight, and strategy. While the end goal is to strike a favorable deal, it’s equally important to ensure that the terms are transparent, fair, and provide a foundation for a successful and sustainable partnership. Whether you’re on the buying or selling side, a well-negotiated SPA is instrumental in ensuring that your interests are well protected and the transaction is set up for success.

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