Sales and Purchase Agreement (SPA) Advisory
- Transaction Advisory
- Acquisition Due Diligence
- Sales & Purchase Agreement
- Vendor Due Diligence & Vendor Assistance
Sales and Purchase Agreement (SPA) Advisory
In any transaction, a Sales and Purchase Agreement (SPA) represents key pricing and commercial negotiations outcome. Vendors and acquirers alike are becoming sophisticated in exploiting potential value gained through negotiations and implementation of the contractual agreement.
Building on the information gained during the due diligence process, the Sales and Purchase Agreement (SPA) Advisory specialists of Farahat & Co. are ideally positioned in providing expert support during the negotiations of the SPA, and in assisting you in the articulation and identification of value issues that are related to deal completion and pricing mechanics.
The financial terms and conditions of a Sales and Purchase Agreement are key when you are planning to sell a business and you want to ensure a clean, seamless exit at a fair and predictable price. As consequential, provisions and mechanics of a SPA can help when you’re seeking appropriate ways of mitigating risks when buying a business, especially in the event wherein the financial position of your target isn’t as expected.
Farahat & Co.’s in-house experts help formulate contractual solutions to commercial and accounting issues, guiding clients on appropriate pricing mechanisms, and providing recommendations on warranties, indemnities, and accounting policies.
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Protecting Value Through an Integrated SPA Advisory Service
Advising on critical accounting-related aspects of a Sales and Purchase Agreement, helping ensure potential issues are identified and reflected in SPAs, and supporting you throughout the whole SPA drafting, negotiation, and review process, our Sales and Purchase Agreement Advisory service will help protect your position the best way possible.
Our SPA Advisory team combines Transaction Advisory and Financial Due Diligence expertise and skill sets in aiding you:
- Mitigate risks that are identified during the process of Financial Due Diligence;
- Understand the acquired business’ working capital requirements to determine normalized working capital, which can be useful during SPA negotiations;
- Consider adjustments that need to be made between Equity Value and Enterprise Value, and formulate arguments and counterarguments in justifying your proposed approach; and
- Elaborate all SPA accounting aspects, including warranties, representations, pricing mechanism, and drafting of accounting related clauses.
Our experts also undertake the review of completion accounts that are used in the determination of a deal’s final purchase consideration, ensuring they reflect SPA provisions agreed between the vendor(s) and buyer(s). Whenever you’re doing a transaction, we can assist you with:
- Leakage protection;
- The structuring of the SPA purchase price mechanism;
- Advisory on ‘locked box’ mechanism;
- Formulation of structured offers during the commencement of a deal;
- Warranties and indemnities;
- Agreeing on normal working capital or net asset targets; and
- Accounting policies/hierarchy and definitions for completion accounts
Prior to the signing of a Sales and Purchase Agreement, we’ll help you in the assessment of critical exposures. We can also advise on the correct ways in determining normal working capital level, cash, and ‘debt-like’ items. The arguments, as well as counterarguments we can set out for you will support negotiations and optimize SPA and price determination. Our SPA Advisors also help with the following:
- Assessment of working capital requirements to set a normalized working capital target (SPA purposes);
- Clarify issues at stake, advise on appropriate pricing mechanism and transaction fundamentals during the early stages of a deal, and help you maximize your position;
- Ensure potential and existing ‘debt-like’ items, as well as other financial risks, are identified and addressed accordingly, either by the consideration of a reduction, through the utilization of warranties and indemnities, or through the completion pricing mechanism in the SPA; and
- Act for you during disputes with respect to earn out or completion accounts or on warranty breach matters.
For vendors, the SPA Advisory team of Farahat & Co. can provide support by:
- Limiting opportunities of price erosion that potential acquirers may undertake, both through post completion mechanism and determination of purchase consideration; and
- Advise on relative merits of completion mechanisms within the context of the specific transaction
Farahat & Co.’s industry experts draw upon over a decade of transactions experience, including forensic experience on Sales and Purchase Agreement dispute resolution. Expect our professionals to help and support you starting from the pre-SPA negotiation up to the review of the completion accounts and negotiations of final purchase consideration. We can represent you in the event of disputes, if involved parties can’t come to a resolution.
A Sales and Purchase Agreement is a crucial piece of documentation, not just for vendors but for acquirers as well. It must be created accordingly, thoroughly, and under the expert advice of a seasoned SPA Advisory team. The value contained in the mechanics and provisions of a SPA that’s at stake may also be greater than the drip or headline price itself. The skilled SPA advisors of Farahat & Co. will help you understand and navigate through pitfalls and complexities to ensure you avoid value leakage, optimize outcomes, and handle risks accordingly.
Our SPA Advisory team understands the needs of clients for practical financial and commercial advice with regards to a Sales and Purchase Agreement. We endeavor to support and protect your position all throughout the transaction process.
Contact us if you are in need of further assistance related to Sales and Purchase Agreement TODAY.