In an M&A transaction, the commercial lawyer is not just a legal technician. They are a strategic ally who protects the entrepreneur and facilitates the closing. We describe their role and how to choose well.
If the tax adviser is the entrepreneur’s confidant, the commercial lawyer is their shield. In a business sale, the seller’s lawyer has a critical role: protecting their client’s legal interests, negotiating warranties and representations, structuring the deal to minimise risks, and facilitating a clean closing.
The difference between good and bad lawyers in this context rarely lies in technical knowledge — most are legally competent. It lies in their understanding of the business context, their negotiation ability, and their sense of proportion.
In the negotiation phase, the lawyer advises the entrepreneur on the deal structure, reviews the letter of intent or term sheet, and identifies the points that need negotiation. A good lawyer at this stage can save months of wasted effort by flagging structural problems early.
During due diligence, the seller’s lawyer manages the legal information flow — contracts, licences, litigation, intellectual property — and prepares responses to the buyer’s requests. The quality and speed of responses during due diligence directly affects the buyer’s confidence in the transaction.
In the contract drafting phase, the lawyer negotiates the most sensitive clauses: warranties and representations, indemnity limits, conditions precedent, non-compete clauses, and dispute resolution mechanisms. This is where the lawyer’s skill matters most — and where most value is either created or destroyed.
At closing, the lawyer verifies that all conditions have been met, reviews the final documentation, and accompanies their client through the signing.
Not all commercial lawyers are equally suited for an M&A transaction. There are specific characteristics the entrepreneur should seek.
M&A experience in the middle market. A lawyer who primarily does general corporate work — company formations, shareholder meetings, articles of association amendments — does not necessarily have the experience for a sale transaction. Ask for references from closed M&A deals.
Sector knowledge. A lawyer who understands your sector’s dynamics — specific regulation, typical contracts, characteristic risks — will negotiate more effectively than a generalist.
Negotiation capability. Negotiating a sale and purchase agreement is not the same as drafting one. It requires the ability to understand the other party’s interests, identify the truly important points, and concede on the secondary to win on the essential.
Sense of proportion. The worst lawyer in an M&A deal is the one who turns every clause into a battle. A good lawyer distinguishes the clauses that genuinely matter from those that are market standard and not worth debating.
Availability. An M&A transaction has its own timeline, and sometimes it is tight. The lawyer must be available when needed, not three days later.
In a middle-market transaction, some clauses in the sale and purchase agreement merit firm negotiation while others do not. A good lawyer knows the difference. These are the ones that matter most to the seller:
Warranties and representations. The statements the seller makes about the company’s condition: that the financial statements present a true and fair view, that there are no undisclosed disputes, that licences are in force. The scope and duration of these warranties are negotiable. A good lawyer limits warranties to what the seller knows or should know, avoids absolute warranties, and negotiates reasonable limitation periods.
Indemnity limits. If a warranty proves incorrect, the seller may be obliged to indemnify the buyer. The indemnity limits — the cap, de minimis threshold, and basket — are critical negotiation points. A 100% cap effectively means you have not sold. A 10-20% cap is more reasonable for standard transactions.
Non-compete clause. The buyer will want the seller not to compete for a period after the sale. The duration (typically 2-3 years), geographic scope, and extent of the prohibited activity must be negotiated carefully. An excessively broad clause can unduly restrict the seller’s professional freedom post-sale.
Price mechanism. If the price includes a working capital adjustment or an earn-out component, the drafting of definitions and calculation mechanisms is fundamental. Ambiguities in these clauses generate post-closing disputes that can cost hundreds of thousands of euros.
Retention conditions. If the buyer requires the seller to remain in the company for a transition period, the terms — duration, functions, remuneration, termination causes — must be clear in the contract.
Over-litigation. Negotiating every point as the last line of defence exhausts both parties. Accept market-standard clauses and concentrate energy on points that truly matter.
Poor communication with their client. Sometimes the lawyer negotiates without consulting the entrepreneur, adopting positions that do not reflect their client’s real priorities. The entrepreneur may be willing to accept a broader warranty in exchange for a higher price, but if the lawyer does not ask, they will never know.
Unfamiliarity with market practice. Rejecting clauses that are absolutely standard in M&A generates mistrust in the buyer and unnecessarily delays the process. A lawyer unfamiliar with what is standard in their sector can cost the seller more money than their entire fee.
Excessive rigidity in the final phase. I have seen transactions fall apart at the finish line because the seller’s lawyer refused to concede a minor point. The ability to distinguish between the essential and the secondary — and to concede on the secondary when the deal benefits their client — is a skill not taught in law school.
Not coordinating with the tax adviser. The sale and purchase agreement has direct tax implications: the price structure, earn-out treatment, withholdings, and tax warranties. A lawyer who negotiates without coordinating with the tax adviser can create problems that emerge after closing.
A bad lawyer in an M&A transaction does not just charge their fees — they generate indirect costs that far exceed those fees. Process delays that erode buyer confidence. Poorly negotiated clauses that create excessive obligations for the seller. Post-closing disputes arising from contractual ambiguities.
The cost of a good commercial lawyer specialising in M&A ranges from 15,000 to 60,000 euros for a middle-market transaction. It is a minimal fraction of the sale price and the highest-return investment the entrepreneur can make in the entire process.
A good commercial lawyer in an M&A deal is, literally, the best money an entrepreneur can spend. But they must be chosen on merit, not by inertia or price.
Are you advising a client in a similar process? Learn about our intermediary channel.
See also: How to sell a company in Spain: essential guide · The tax adviser in a company sale · The accounting firm as a gateway · Due diligence in practice · The shareholders’ agreement.
Dirk Manuel Martens Jimenez Founder, Blue Mountain Capital
Founder of Blue Mountain
Over 15 years investing in Spanish companies with patient capital. Expert in business succession, corporate governance, and middle-market investment.
By Blue Mountain Capital
By Dirk Manuel Martens Jiménez
By Dirk Manuel Martens Jiménez
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