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Why a Tailored Sale and Purchase Agreement is Key to Smooth Business Transfers in the EU

Peter Hubert, Partner, MDN Group

When business owners in the European Union decide to sell, they begin a journey that demands careful planning, open communication, and professional advisory. Whether the motivation is retirement, the pursuit of new ventures, or a strategic refocus, selling a business is one of the most significant decisions an entrepreneur can make. 

At the heart of this process is the Sale and Purchase Agreement (SPA), a legally binding contract that clarifies each party’s rights and obligations. By defining expectations early, an SPA can minimize risks, foster transparency, and provide assurance to both buyers and sellers.

Understanding the Role of an SPA

An SPA is the primary document governing the terms of a business sale. In the EU, where regulations vary from country to country, a well-structured SPA is crucial for preventing misunderstandings and disputes. Cultural differences, legal traditions, and corporate structures can make cross-border transactions more complex, but a comprehensive agreement can smooth the process.

The SPA usually covers how the deal is structured, the purchase price, any included assets or liabilities, and the steps for dispute resolution.

As Denis Stukalov, Managing Partner at MDN Group, explains, “We always advise our clients to have a clear, comprehensive SPA in place because it ensures that neither party is caught off-guard once the deal is closed.”

Key Components of the SPA

Although each SPA should reflect the particular circumstances of the business, several standard elements are nearly always included:

1. Identification of Parties
   The agreement specifies the buyer and seller by name, legal structure, and any additional key details. In cross-border deals, these clarifications become especially important.
2. Purchase Price and Payment Plan
   This section details the amount of money to be paid and the schedule for payments. It can cover upfront deposits, installment plans, or financing strategies to help both parties anticipate cash flow.
3. Assets and Liabilities
   Parties must identify exactly which assets (machinery, real estate, intellectual property, or goodwill) and which liabilities (debts, pending lawsuits, or contractual obligations) are included. Clear communication here prevents unwanted surprises for the buyer or the seller.
4. Representations and Warranties
   Both sides make assurances about various aspects of the deal. A seller might confirm the legal authority to sell and the accuracy of any financial disclosures, while a buyer might declare sufficient resources to close the transaction.
5. Conditions Precedent
   These are the prerequisites that must be met before the sale becomes final, such as obtaining regulatory approvals or completing a thorough due diligence process. If these conditions remain unfulfilled, the deal may not move forward.
6. Closing Procedures
   The SPA outlines when, where, and how the final transfer of ownership occurs. It also covers post-closing tasks such as transferring titles, intellectual property rights, or existing contracts.
7. Dispute Resolution
   Even a well-written SPA can face challenges if new information arises. By establishing clear pathways for arbitration, mediation, or court proceedings, the agreement protects both parties from escalating disagreements.

Tailoring the Agreement for EU Requirements

A generic SPA will not capture the unique considerations involved in EU transactions. Different member states can have their own legal frameworks concerning tax obligations, employment rights, or antitrust regulations. A tailored SPA ensures that local requirements are met and that no crucial details are overlooked.

Furthermore, every business sale has its particularities. From industry-specific licenses to cross-border intellectual property issues, a customised contract is often the only way to minimise risk.

“Our clients appreciate how a tailored SPA can remove uncertainty and align interests right from the start,” notes Martin Bakker, Partner at MDN Group. “By focusing on specific goals, we create a smoother and more transparent negotiation process.”

Mitigating Risk and Building Trust

A diligent SPA clarifies rights, obligations, and procedures so that both buyer and seller have a complete picture of the deal. This is especially beneficial in cross-border situations, where parties may be navigating language barriers and unfamiliar legal systems. An SPA that addresses these hurdles head-on promotes confidence and fosters collaboration.

By setting out standards for financial disclosures, timelines, and closing procedures, the contract reduces the likelihood of last-minute complications. This transparent framework for cooperation not only accelerates transactions, it also sets a positive tone that helps both parties transition more smoothly into post-acquisition responsibilities.

Planning a Successful Transaction

Selling a business involves valuations, negotiations, and alignment with EU regulations. Because the SPA plays such a central role, sellers are well-advised to consult professionals who understand regional complexities and industry best practices. 

When thoughtfully drafted, an SPA protects the hard-earned value of a business, while also offering reassurance to buyers.Through timely preparation, open communication, and robust contractual safeguards, you can protect everyone’s interests and pave the way for a well-executed, mutually beneficial business transfer.