The share purchase agreement is the most important document in an M&A transaction. We explain the key clauses every business owner must understand before signing.
The Share Purchase Agreement (SPA) can run between 60 and 150 pages, filled with legal terminology that the average business owner does not command. Yet it is the document that defines both parties’ rights and obligations for years after closing.
A standard SPA in the Spanish middle-market is organised into: definitions, object of sale, price and payment mechanism, conditions precedent, closing mechanics, representations and warranties, indemnification, post-closing commitments, and general provisions.
The price can be fixed (locked box) or adjustable (completion accounts). The locked box provides price certainty to the seller. Completion accounts protect the buyer against variations in working capital and debt between signing and closing.
These are declarations the seller makes about the company’s condition — financial statements, tax compliance, contracts, employment, litigation, regulatory compliance, IP, and environment. The seller should negotiate the scope carefully, qualifying with “to the seller’s knowledge” where appropriate.
This document informs the buyer of exceptions to the representations. Everything not disclosed is presumed guaranteed. The business owner must invest time and care in its preparation.
Key parameters include the cap (typically 15-40% of sale price for general contingencies), the basket or deductible threshold, and the claims period (typically 18-24 months for general, up to five years for tax).
Typically two to five years in a defined geographic scope. The business owner should ensure this does not unreasonably prevent future activities.
If applicable, earn-out clauses require precise target definitions, measurement periods, accounting standards, and protection mechanisms. Escrow retention terms — duration, release conditions, interest ownership — must also be negotiated.
Read the entire contract. Question everything you do not understand. Do not focus solely on price — warranty and indemnification clauses can have equivalent economic impact. Invest in the disclosure letter. Negotiate with judgement, not ego — the objective is a balanced contract that works for both parties.
Behind every transaction in the middle-market, there are people making decisions that will affect their lives for years. The business owner contemplating a sale is not just executing a financial transaction — they are letting go of something that has defined their identity, provided their purpose, and shaped their daily existence for decades.
Understanding this human dimension is not optional for the serious investor — it is essential. The deals that close successfully and generate lasting value are overwhelmingly those where both parties feel heard, respected, and fairly treated throughout the process. The deals that fail — or that close but generate conflict afterwards — are those where one or both parties feel that the process was adversarial rather than collaborative.
This does not mean being soft on commercial terms. It means being honest about our position, transparent about our analysis, and respectful of the seller’s legitimate interests and concerns. It means recognising that the best outcome is not one where we extract maximum value from the other side, but one where both sides feel the terms are fair and the relationship has a solid foundation for the years ahead.
After more than fifteen years and hundreds of transactions analysed, certain patterns become clear. The quality of advisers on both sides has a disproportionate impact on outcomes. Well-advised sellers have realistic expectations, organised documentation, and constructive approaches to negotiation. Poorly advised sellers have inflated expectations, chaotic information, and adversarial postures that undermine their own interests.
The timing of transparency matters enormously. Sharing information — about concerns, about reasoning, about limitations — early in the process builds trust and prevents misunderstandings from escalating. Withholding information for tactical advantage almost always backfires, because the middle-market is a small world where reputations are built and destroyed one transaction at a time.
Finally, patience is a genuine competitive advantage. The investor who can wait for the right opportunity, who does not force timelines, and who is willing to walk away from a transaction that does not feel right is the investor who, over a long career, accumulates a portfolio of excellent investments and a reputation that opens doors. In the Spanish middle-market, where relationships matter deeply and word of mouth travels fast, that reputation is perhaps the most valuable asset an investor can possess.
By Blue Mountain Capital
By Blue Mountain Capital
By Blue Mountain Capital
If you wish to explore a potential collaboration or present an investment opportunity, we invite you to contact us. We guarantee absolute confidentiality in all our conversations.