Deal Structure and the Sale and Purchase Agreement in M&A
An overview of deal structure and the Sale and Purchase Agreement (SPA) in M&A transactions, and what TS analysts need to understand about both.
Transaction Services analysts work within the context of M&A transactions, and understanding how deals are structured — and what the Sale and Purchase Agreement (SPA) contains — is essential for performing FDD with genuine commercial awareness. You do not need to be a lawyer, but you need to understand the financial mechanics embedded in the SPA.
The Two Main Deal Structures
Share Deal
The buyer acquires the shares of the target company. This is the most common structure in private M&A.
- The buyer acquires all assets and liabilities of the company
- Tax history, contracts and employees transfer automatically
- FDD is critical to understand what you are buying
Asset Deal
The buyer acquires specific assets (and sometimes liabilities) of the target, rather than the legal entity itself.
- More selective — the buyer can choose which assets to acquire
- More complex structurally
- Common in real estate, distressed situations or carve-outs
The Sale and Purchase Agreement
The SPA is the legal contract that governs the transaction. Its key financial provisions include:
Price and Consideration
- The headline enterprise value or equity value
- How consideration will be paid (cash at closing, deferred consideration, earn-out)
- Any escrow arrangements
Completion Mechanism
- Whether the deal uses locked-box or completion accounts
- The reference date and reference balance sheet
- Net debt and NWC definitions
- The process for preparing and reviewing completion accounts
Warranties and Representations
The seller makes statements about the business (financial, legal, tax, operational). If these turn out to be false, the buyer can bring a warranty claim. Warranties typically include:
- Accuracy of the accounts
- No material change since the accounts date
- No undisclosed liabilities
- Tax compliance
Indemnities
Specific one-way protections for known risks that the buyer is not willing to take on a warranty basis — for example, indemnities for specific litigation matters or tax risks identified in due diligence.
Limitations
- Cap on warranty claims (often 100% of consideration)
- De minimis and basket thresholds (minimum claim sizes)
- Time limits for claims (typically 12–24 months for general warranties, longer for tax)
The FDD Team's Interaction with the SPA
FDD advisers do not draft the SPA — that is the lawyers' job. But the FDD team:
- Inputs the agreed net debt and NWC definitions
- Identifies items that should become specific indemnities or additional warranties
- Provides the financial basis for warranty disclosure schedules
- May advise on completion accounts procedures
A strong TS analyst understands how their work feeds into the SPA, and can identify issues during fieldwork that need to be flagged to the legal team.
Conclusion
The SPA is the document that makes the deal real. TS analysts who understand its financial mechanics can give better advice and flag issues that matter — not just accounting anomalies, but commercial risks with legal consequences.
The Transaction Services Interview Programme (€119.99, one-time) covers SPA mechanics, completion accounts and the full deal context that FDD analysts need to understand. Enrol today.