Introduction to Purchase Agreements
Cut through the formality and legalese found in purchase agreements to build intuition and understanding of common provisions and concepts found in these core transaction documents. Participants learn to efficiently navigate, incisively interpret, pointedly question, and successfully negotiate purchase agreements.
Introduction to Purchase Agreements Course Overview
Sale & Purchase Agreement (“SPA”) Overview
- Why SPAs are Needed
- Evaluating the “Best” Offer: Price, Terms, Certainty, & Fit
- Where & How SPAs Fit in the Transaction Process
Preliminary Agreements
- Acquisition Documents
- Preliminary Agreements vs. Definitive Agreements
- Comparison of IOIs vs. LOIs vs. SPAs
- Structure & Content of an LOI
- LOI Tips, Tricks, & Discussion Points
SPA Structure & Anatomy
- Terminology
- Purpose of SPA
- Structure & Anatomy of a SPA
- Focal Areas: Purchase & Sale, Reps & Warranties, Disclosure Schedules, & Indemnification (Remedies)
Purchase & Sale Provision
- Purchase & Sale Provision—Defining the Deal Consideration
- Form of Consideration, e.g., Cash, Shares, Debt, or a Combination
- Adjustments to the Purchase Price / Consideration
- Holdbacks, e.g., Escrows, Earn-outs, & Deferred Payments
Reps & Warranties
- Reps & Warranties Defined
- Categories of Reps: True Fundamental, Statutory, & General
- Common Seller Reps
- How ‘Informal’ Business Representations Become Formal Legal Reps
- Risk Allocation in the SPA
- Drafting Techniques That Shift Risk
- Role of Knowledge Qualifiers: Actual Knowledge vs. Constructive Knowledge
- Lookbacks
- Materiality / Material Adverse Change or Effect (“MAC” or “MAE”)
- Materiality Scrapes
- Ordinary Course of Business (“OCB”)
- Dollar / Customer Thresholds
- Disclosure Schedules
- Disclaimer of Other Reps & Warranties / Non-Reliance
Disclosure Schedules
- Purpose of Disclosure Schedules – ‘Smoking Out the Facts’
- Affirmative vs. Negative Disclosures
- Seller vs. Buyer Perspective
Indemnification (Remedies)
- Defining Indemnification
- Escrowed Funds
- Survival Period(s)
- Caps, Baskets (Tipping vs. Deductible), and Mini-Baskets
- Various Indemnification Obligations
- Indemnifying and Indemnified Parties
- Indemnified Losses – Various Types & Considerations
- Structure of Liability, e.g., Joint and Several, R&W Policy, etc.
- Notice Procedures
- Indemnification Procedures, i.e., Who Defends
- Funding the Indemnity
- Limits of Indemnification
- Exceptions to Enforcing Indemnification Clauses
Closing Considerations & Termination
- Seller Closing Deliverables & Conditions
- Buyer Conditions
- Regulatory Conditions
- Closing & Post-Closing Considerations
- Two-Step Process vs. Simultaneous Sign & Close
- Termination Provisions
Importance of Definitions
- Discussion of Select Defined Terms and Points to Consider
- Indebtedness
- Knowledge
- Loses / Liabilities
- Material Adverse Effect
- Net Working Capital
Negotiation Considerations with Select Common Representations
- Financial Statement Rep
- Accounts Receivable / Collectability Rep
- Material Customer Rep
- Undisclosed Liabilities Rep
- Full Disclosure / 10b-5 Rep
- Express Non-Reliance Provision (Opposite of Full Disclosure Rep)
- Anti-Sandbagging & Pro-Sandbagging Provisions
Overview of Rep & Warranty Insurance & Impact on SPA Negotiations
- Buy Side vs. Sell Side
- Benefits & Risks
- General Policy Exclusions
- Comparison of a Transaction With & Without R&W Insurance
- Key Terms and Example Policy Economics
- Typical R&W Insurance Process & Timeline
