The definitive legal contract that formalises the sale and purchase of a company, setting out all terms, conditions, representations, warranties, and indemnities agreed between buyer and seller.
If the letter of intent sets out what the parties intend to do, the sale and purchase agreement (SPA) is where those intentions become legally binding obligations. It is the definitive document that governs a company acquisition — the contract that determines exactly what is being sold, at what price, under what conditions, and what happens if things go wrong after closing.
A sale and purchase agreement (SPA) is the binding contract through which one party (the seller) transfers the ownership of shares or assets to another party (the buyer) in exchange for a price and under specific terms and conditions. In Spain, it is the equivalent of the “contrato de compraventa de participaciones” or “contrato de compraventa de acciones.”
The SPA is the culmination of the M&A process. By the time it is signed, both parties have completed negotiations, the buyer has finished due diligence, and all the commercial terms have been agreed. The SPA transforms those agreements into enforceable legal language.
A typical SPA in the Spanish mid-market runs between 40 and 100 pages (excluding schedules), though the complexity varies enormously depending on deal size, structure, and the number of issues uncovered during due diligence.
Definitions and interpretation. Every important term is defined precisely to avoid ambiguity. “Material adverse change,” “ordinary course of business,” “permitted leakage” — each has a specific contractual meaning that may differ from its common usage.
Sale and purchase mechanics. Who is selling what to whom, at what price, and when. This section specifies whether the transaction involves shares (the most common in Spain) or assets, the exact number of shares being transferred, and the completion date.
Price and payment. The headline price, any price adjustments (typically for working capital and net debt at closing), the payment schedule, and any escrow or retention mechanisms. If there is an earn-out, its terms are detailed here or in a separate schedule.
Representations and warranties. These are the most negotiated clauses. The seller “represents and warrants” specific facts about the company: the accuracy of financial statements, the absence of undisclosed liabilities, compliance with laws, the validity of key contracts, the status of employees, and dozens more. If any representation proves untrue, the buyer has a claim for indemnification.
Indemnities. Specific indemnities for known risks identified during due diligence — a pending tax inspection, a labour dispute, an environmental issue. These go beyond general warranties and provide direct financial protection for identified contingencies.
Limitations on liability. Caps on the seller’s maximum liability (usually a percentage of the purchase price), time limits for bringing claims (typically 18-24 months for general warranties, longer for tax and fundamental warranties), minimum thresholds (de minimis and basket provisions) below which claims cannot be made.
Conditions precedent. Actions or approvals that must be completed before the transaction can close: regulatory approvals, third-party consents, absence of material adverse change.
Covenants. Obligations of both parties between signing and closing (the interim period), and sometimes after closing. The seller typically covenants to run the business in the ordinary course; the buyer may covenant to maintain employment levels or preserve the company’s identity.
The SPA is where the economic terms negotiated over months become legally enforceable. Every clause matters, and the balance of risk between buyer and seller is largely determined by the detail of this document. A seller who does not understand the implications of the representations they are giving, or who accepts liability caps that are too high, is exposing themselves to significant post-closing risk.
For the buyer, the SPA is the primary mechanism for ensuring that the company they acquire matches what was presented during the sale process. The warranties provide a contractual backstop: if the company has hidden problems, the seller bears the financial consequences.
Blue Mountain acquires 80% of a food processing company for 15 million euros. Key SPA provisions include:
In the Spanish mid-market, two to six weeks is typical once the parties have agreed the commercial terms and the buyer has completed due diligence. Complex transactions or those with multiple selling parties can take longer. The drafting process usually begins with the buyer’s lawyers producing a first draft, which the seller’s lawyers then mark up.
Convention is that the buyer’s legal team produces the first draft. This gives the buyer an initial advantage in framing the document’s structure and risk allocation. However, the seller’s lawyers will negotiate every material clause, so the final document reflects a balance between both parties.
This is strongly discouraged. The SPA is a complex legal document with significant financial implications. A business owner who negotiates without experienced M&A legal counsel risks accepting unfavourable terms, giving excessively broad warranties, or missing protective clauses that are standard market practice. The cost of quality legal advice is a small fraction of the amounts at stake.
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