Secret Seller episode 7 – Creating and agreeing the Share Purchase Agreement

In episode seven of our secret seller series, our seller talks us through the ups and downs of creating a Share Purchase Agreement (SPA).

If you’re not up to date with our secret seller series, be sure to read episode six on Due Diligence before diving into this month’s entry.

At the start of the SPA process, Brian had warned me that there would be a little bit of light reading. What he meant was over 100 pages of legal jargon!

This is where getting the right solicitor is so important. Once we had accepted the offer, Brian reached out to five different solicitor firms he had dealt with previously when working with other sellers. We then had meetings with two of the firms.

One of the firms had dealt with the buyer’s solicitors on several occasions and, because of their experience working on similar SPAs, it was an easy choice to make.

Again, this is where Brian came into his own and arranged for the agreed fee to be capped. Of course, we paid the full price but at least it was never going to be more than that.

The buyer’s solicitors put together the SPA, then it went to our solicitors who made suggested changes, and finally it came to us to read through. Next, we had an online meeting to go through further changes and any questions we had.

Part of the SPA is the warranties. This was where we had to declare any potential issues, contracts we were tied into, and previous staffing issues. It might not sound like a lot, but it’s a big chunk of the SPA that I had to read, a two-hour meeting with the solicitor (I didn’t realise Teams calls went for more than an hour), and then more reading to make sure everything was covered.

While this and due diligence were going on, the buyers were putting together their change in control application to go to the FCA. When we first accepted the offer the turnaround on this was four months, and then down to six weeks. When our application finally went in, it came back in less than two weeks. That put the pressure on to get everything else over the line!

I have to say that the SPA went smoothly. We knew what we were expecting from the buyers, and there weren’t any nasty shocks from them (or from us).

A week before the planned completion we heard that the SPA had been agreed by all, but then the penny dropped. The buyer’s solicitors missed that a separate SPA was needed for our self-employed exiting consultant who had his own limited company!

There was some legal toing and froing. At one point we were going to be responsible for any issues arising from our other exiting consultant, and liable for the whole purchase price, not just the bit we were going to be receiving (I wasn’t overly happy with that scenario). However, in the end, the solicitors got there – but were we finally ready for completion?

Get in touch

If you are looking to sell your business and want an organisation that looks after you and every single aspect of the process, speak to Melo. Email hello@melo.co.uk or call 0113 4656 111.