SPA

Question 1

What are the 2 common models for defining the purchase price in an SPA?

Answer 1

1. Locked Box
2. Completion Accounts

Question 2

Which tools and provisions in a SPA can be used to manage and allocate risks?

Answer 2

1. Earn-out, contigent payments ✅💰
2. Warranties & indemnifications 🙋‍♂️
3. Limitation periods 🕰️
4. Cap 🪚
5. De minimis 🥢
6. Basket 🧺
7. Holdback, escrow 🔗🔐

Question 3

What is a typical cap level?

Answer 3

20-50 percent of the purchase price

Question 4

What is typical de minimis level?

Answer 4

0.1-0.5 percent of the purchase price

Question 5

What is a typical basket level?

Answer 5

0.5-1.0 percent of the purchase price

Question 6

List typical / common warranties

Answer 6

Title

Financial Status

Litigation

Assets

Employment

Intellectual Property

Question 7

What is a common limitation a seller has to accept?

Answer 7

Limitation of competition
no-compete clause

Question 8

M____ a____ c____ ?

Answer 8

Material adverse change

Question 9

What size has a holdback typically?

Answer 9

tbd

Question 10

How can a holdback be implemented?

Answer 10

via an escrow account

Question 11

What are typical provisions regarding a locked box model

Answer 11

Permitted leakage
…..

Question 12

in what context are the terms preliminary and definitive purchase price used?

Answer 12

In the context of the completion accounts method (as opposed to the locked box method)

Question 13

What are typical conditions precedent to closing?

Answer 13

Approval by the anti-trust authorities
…

Question 14

What are important considerations with regard to an earnout?

Answer 14

Basis: Revenue, EBITDA

Duration —tax implications

Accounting
…