Sales and Purchase Agreement (SPA) Advisory
Sale and Purchase Agreement (SPA) Advisory Services
Protect deal value in the fine print, where headline price is often only part of the story.
In any business transaction, a Sale and Purchase Agreement (SPA) represents the outcome of key pricing and commercial negotiations. Both vendors and acquirers are becoming increasingly sophisticated at extracting value through the negotiation and implementation of the agreement itself, not just the headline price.
- Built on due diligence findings, translating financial due diligence results directly into contractual protection
- Full lifecycle support, from pre-signing exposure assessment through to completion account review
- Dispute representation, drawing on forensic experience in SPA-related disputes when negotiations break down
The financial terms of an SPA matter whether you are selling a business and want a clean, predictable exit, or buying one and need to mitigate the risk that the target’s financial position isn’t quite what it appeared to be.
What Is SPA Advisory?
SPA Advisory refers to specialist support in negotiating, drafting and reviewing the accounting and financial terms of a business Sale and Purchase Agreement, distinct from the standard real estate SPAs used for property purchases in the UAE. This service applies specifically to company and business asset transactions, mergers, acquisitions, and divestitures.
Building on the information gained during due diligence, Farahat & Co.’s SPA Advisory specialists help articulate and identify value issues related to deal completion and pricing mechanics. Our team combines Transaction Advisory and Financial Due Diligence expertise to formulate contractual solutions to commercial and accounting issues, guiding clients on appropriate pricing mechanisms and recommendations on warranties, indemnities, and accounting policies.
How SPA Advisory Builds on Due Diligence
Our SPA Advisory work connects directly to the findings of financial due diligence, rather than operating as a separate, disconnected workstream.
- Mitigating identified risks: issues surfaced during financial due diligence are translated into specific contractual protections within the SPA itself.
- Working capital analysis: understanding the acquired business’s working capital requirements to determine a normalised working capital target, a figure that carries significant weight in SPA negotiations.
- Equity value to enterprise value adjustments: identifying and formulating the arguments and counterarguments needed to justify the correct adjustments between these two figures.
- Accounting-related SPA clauses: elaborating the full range of accounting aspects within the agreement, including warranties, representations, pricing mechanisms, and the drafting of accounting-related clauses themselves.
Key SPA Mechanisms We Advise On
SPA negotiations involve a number of technical mechanisms that materially affect the final value each party receives. Our team supports clients across:
- Leakage protection: preventing value from leaving the target business between the valuation date and completion.
- Purchase price mechanism structuring: determining whether a locked box or completion accounts mechanism better suits the specific transaction.
- Locked box mechanism advisory: guidance on the relative merits and risks of a locked box approach within the context of your specific deal.
- Structured offers: formulating well-supported offers at the commencement of a deal.
- Warranties and indemnities: negotiating the scope and limitations of seller warranties and buyer indemnity protections.
- Working capital and net asset targets: agreeing on normal working capital or net asset targets that will apply at completion.
- Accounting policies and hierarchy: establishing the accounting policies, definitions, and hierarchy that will govern the preparation of completion accounts.
Pre-Signing and Completion Support
Before signing, we help assess critical financial exposures and advise on the correct methods for determining normal working capital levels, cash, and debt-like items. The arguments and counterarguments we develop support your negotiating position and help optimise both the SPA terms and the final price determination.
After signing, our experts undertake review of the completion accounts used to determine a deal’s final purchase consideration, confirming they properly reflect the SPA provisions agreed between vendor and buyer. We also assess working capital requirements against the normalised target, and ensure that debt-like items and other financial risks are properly identified and addressed, whether through a price reduction, a warranty and indemnity claim, or the completion pricing mechanism itself.
Support for Vendors and Acquirers
Our SPA Advisory service is structured to protect both sides of a transaction, since the two parties have genuinely different priorities within the same agreement.
For vendors, we help limit opportunities for price erosion that acquirers may attempt through post-completion mechanisms or the determination of purchase consideration, and advise on the relative merits of different completion mechanisms in the context of your specific deal.
For acquirers, we help identify contractual protections against the risk that the target’s financial position doesn’t match what was represented during negotiations, structuring warranties, indemnities and pricing mechanisms accordingly.
Where negotiations break down entirely, our team can also represent clients in disputes concerning earn-outs, completion accounts, or warranty breach matters, drawing on over a decade of transaction experience, including forensic experience in SPA dispute resolution.
Why Choose Farahat & Co. for SPA Advisory
A Sale and Purchase Agreement is a crucial piece of documentation for both vendors and acquirers, and the value contained in its mechanics and provisions can be greater than the headline price itself.
- Integrated expertise: our SPA Advisory team combines Transaction Advisory and Financial Due Diligence skill sets, rather than treating SPA negotiation as a standalone legal exercise.
- Full transaction lifecycle: support from pre-SPA negotiation through completion account review and, where necessary, dispute resolution.
- Forensic dispute experience: over a decade of transaction experience, including SPA-specific dispute resolution work.
- Coordination with related services: our SPA work connects directly with our Acquisition Due Diligence, Vendor Due Diligence, and Valuation teams for a consistent view of the deal.
- Established track record: over four decades supporting UAE businesses through complex financial transactions.