Anatomy of an SPA

10.1How to read an SPA — before what’s in it

An SPA is not a novel. Read it cover to cover like prose and you will drown in defined terms before you understand the deal. Experienced lawyers read an SPA the way an engineer reads a plan: structure first, detail second. Start with the contents page and ask three questions. Where is the money (clause 3)? What are the conditions — will there be a gap between signing and completion (clause 5)? And where is the risk allocation — the warranties, limitations and indemnities that decide who pays when something turns out to be wrong (clauses 8 to 10)?

Then read the definitions — with suspicion. Each defined term is a small contract in itself: an innocuous-looking capitalised word can widen or shrink an obligation that lives forty pages away. As you read, keep a crib sheet of the defined terms that keep appearing — in Sunrise you would jot down “Disclosed”, “Seller’s Knowledge”, “Leakage”, “Fundamental Warranties”. It feels slow, and it saves hours.

Finally, remember that in a well-drafted SPA the operative clauses are short and the schedules carry the substance: the warranty catalogue, the completion steps, the facts about the target. A first read that skips the schedules has skipped most of the contract.

The rest of this chapter is a guided tour: open the Sunrise SPA in a second window and follow along.

10.2The document map

Laid out as a plan, the SPA has seven working layers. Everything in a private M&A agreement slots into one of them:

Parties and recitals. The parties clause tells you who is actually bound: here, only Meridian (the Seller) and Atlas (the Buyer). Notice who is not a party: the Target itself. Solaris is the thing being sold, not a promisor — which is why obligations about it are drafted as the Seller “procuring” that it acts. The recitals (the “Background” paragraphs at the top of the SPA) tell the deal’s story: what the Target is, who owns it, why the parties are contracting. They are context, not operative promises — a court may glance at them to resolve an ambiguity, but no one ever sued on a recital. If a statement matters, it belongs in the warranties.

Definitions and interpretation (clause 1). This is the SPA’s control panel. A definition looks like housekeeping; it is actually where risk gets allocated one capitalised word at a time. Take “Disclosed”: matters that are Disclosed defeat a warranty claim (clause 8.3), so the definition decides how good a disclosure has to be to protect the seller. Sunrise requires matters to be “fairly disclosed… with sufficient detail to enable a reasonable buyer to identify the nature and scope of the matter disclosed”. Delete those words and a problem buried on page 900 of a data-room PDF could defeat a claim. Or take “Seller’s Knowledge”: it converts absolute statements (“there is no litigation”) into knowledge-based ones (“so far as the Seller is aware…”). The interpretation rules beneath the definitions matter too: “including” is made non-exhaustive, and agreed form documents are defined (see section 10.4).

Sale and purchase (clause 2). Three sentences, and the reason the whole document exists. Clause 2.1 is short but load-bearing: “full title guarantee” imports statutory covenants about ownership under the Law of Property (Miscellaneous Provisions) Act 1994. The words “free from all Encumbrances” pick up a deliberately broad definition covering charges, options, pre-emption rights and more. Note also clause 2.3: all the shares or none — the buyer will not be left owning 80% of a company alongside a stranger.

Price machinery (clauses 3 and 4). Clause 3.1 states the Consideration: €42,000,000. Clause 3.2 adds the Locked Box Interest of €4,000 a day, compensating the seller for handing over the business’s economics at the Locked Box Date but the cash only at Completion. Clause 4 is the locked box protection itself: no Leakage to the seller’s side since the box closed, and euro-for-euro repayment under clause 4.3 if there was. Chapter 9 unpacks the mechanism — here, just place it on the map.

Conditions and the gap (clauses 5 and 6). Because no one may acquire a qualifying holding in a MiCA-authorised firm without approval, Completion is conditional on the CBI’s consent (clause 5.1). There is also a Long Stop Date after which either side can walk away (clause 5.5). Clause 6 governs the months in between: the seller must run the business in the ordinary course and needs buyer consent for the significant moves listed in clause 6.2. The gap gets its own chapter: Chapter 13.

Completion (clause 7). Clause 7 fixes when and how completion happens: five Business Days after the last condition is satisfied (clause 7.1), money to the seller’s solicitors’ client account (clause 7.3). But the actual choreography lives in Schedule 2: transfer form, share certificates, resignations, board minutes, power of attorney. This split is deliberate and typical: the clause states the obligation, the schedule holds the checklist.

The risk allocation suite (clauses 8, 9 and 10). This is the SPA’s centre of gravity. Clause 8 gives the warranties their force (the catalogue itself is Schedule 3). Clause 9 is the seller’s shield — time limits, de minimis, basket, caps. Clause 10 carries the tax covenant and the specific indemnity for the Legacy AML Matter (clause 10.2). The detail comes later: Chapter 11 covers warranties and disclosure, Chapter 12 indemnities and the tax covenant. Notice the architecture: statements in a schedule, force and qualification in clause 8, limits in clause 9, pound-for-pound promises in clause 10.

Restrictive covenants (clause 11). Atlas is paying €42 million largely for goodwill — clients, staff, know-how. Clause 11 stops Meridian from taking it back: a three-year non-compete and two-year non-solicitation of senior employees and clients (clause 11.1). English courts enforce such covenants on a share sale only so far as reasonably necessary to protect the goodwill sold — hence the careful severance language in clause 11.3.

10.3Boilerplate — where the boring clauses win cases

Boilerplate is the deal-neutral machinery at the back of the contract — clauses that look identical from deal to deal and are read by almost no one at signing. Then a dispute starts, and they are the only clauses anyone reads.

Confidentiality and announcements (clause 12). Both sides must keep the deal terms confidential, with carve-outs in clause 12.2 for disclosures required by law, regulators or stock exchange rules — essential for Atlas, a listed company with announcement obligations. Note clause 12.4: the February NDA hands over to this clause at Completion, but revives if the deal dies first.

Further assurance and assignment (clause 13). Further assurance (clause 13.1) is a mop-up promise: if some extra document is needed to perfect the transfer, the seller must sign it. Assignment (clause 13.2) answers an easily missed question: who is allowed to hold the benefit of this contract? The default is no assignment without consent: a seller gives warranties to a counterparty it has sized up, not to the world. But the buyer wins two standard carve-outs: assignment within its wholly-owned group, and assignment by way of security to its lenders. Both are capped by the tailpiece: no assignment may increase the Seller’s liability.

Entire agreement (clause 14). Months of negotiation generate a sediment of emails, management presentations, calls and heads of terms. The entire agreement clause wipes the slate: clause 14.1 supersedes everything earlier — expressly including the April heads of terms — and clause 14.2 does the real work:

The non-reliance acknowledgement kills claims based on pre-contract statements. If the CFO said something reassuring and wrong on a call, no misrepresentation claim can be built on it: the buyer has agreed it relied only on the written document. The second sentence channels all remedies into contractual damages and rules out unwinding the deal after Completion. A seller cannot redistribute sale proceeds to its investors while there is any chance of being handed the company back. Why warranty damages differ from misrepresentation remedies — and why buyers accept this channelling — is the warranty-versus-representation story in Chapter 11. One thing no drafting can exclude: clause 14.3 preserves liability for fraud, because English law will not let a party contract out of its own dishonesty.

Notices (clause 15). The most underestimated clause in the document. Every claim window in clause 9 ends in the same act: giving notice. Clause 15 prescribes exactly how: in writing, in English, to the addresses and named contacts in clause 15.1. The copy to each side’s solicitors does not itself constitute notice. Clause 15.2 fixes when a notice legally arrives:

General (clause 16). A drawer of small tools. Costs and transfer taxes (16.1–16.2 — the buyer bears stamp taxes on the shares). Variation (16.3): no amendment unless written and signed — protection against “but you agreed on the phone”. Waiver (16.4): going easy on one breach does not surrender your rights for the next. Severance (16.5): if one provision fails, the rest survive. Counterparts (16.6): each party may sign its own copy, and electronic signatures work — the clause that makes remote signings run. And third-party rights (16.7): by default, only the parties may enforce this contract, excluding the Contracts (Rights of Third Parties) Act 1999 — except for one elegant carve-out. Under clause 8.5 the Seller waives claims against the Target’s directors and employees over information they gave for the disclosure exercise. Clause 16.7 makes that waiver directly enforceable by those individuals under the 1999 Act — protection for people who never signed the contract.

Governing law and jurisdiction (clause 17). The Target is Irish, the regulator is the CBI, the price is in euro — yet the SPA is governed by English law with exclusive English jurisdiction (clause 17.1). Nothing odd here: parties choose their contract’s governing law, and both are English companies advised by London firms choosing the system they know — one with deep, predictable case law on exactly these SPA concepts. “Including non-contractual disputes or claims” sweeps connected tort claims into the same forum. What the choice does not do is displace Irish company law, which still governs the Target’s internal machinery — the transfer form, the register of members, the board approval in Schedule 2.

10.4Schedules versus body — where the substance lives

The division of labour is consistent across the market: rules in the body, substance and mechanics in the schedules. In Sunrise: the factual particulars of the Target and its subsidiaries (Schedule 1); the completion deliverables (Schedule 2); the entire warranty catalogue — twelve sections from title to tax (Schedule 3); and the Permitted Leakage list (Schedule 4). Be clear about one thing: schedules are fully part of the contract, as binding as clause 2. They sit at the back to keep the operative clauses readable, not because they matter less. Much of a junior lawyer’s drafting life is lived in schedules.

Alongside the SPA travels a set of “agreed form” documents — in Sunrise, the announcement, the resignation letters, the power of attorney and others flagged in Schedule 2. “Agreed form” is defined in clause 1.2(e): a document agreed between the parties and initialled on their behalf for identification. The initialling is evidence, not ceremony: at completion, no one can dispute which version of a document was the one agreed.

10.5Deeds, signatures and the Mercury problem

English law knows two kinds of written contract. A simple contract needs consideration — something of value flowing each way — and carries a six-year limitation period for claims. A deed is a more formal instrument: it must say on its face that it is a deed, be validly executed as one, and be delivered. In exchange for the formality, it needs no consideration and carries a twelve-year limitation period. M&A practice uses deeds in two situations: where a document lacks consideration (a free-standing guarantee, a deed of release), and where statute demands one. Notably, a power of attorney is valid only if executed as a deed. That is why the power of attorney the Seller delivers at completion (Schedule 2, Part A), letting Atlas vote the Shares pending registration, will be a deed even though the SPA is not.

And the SPA is not: consideration flows both ways — shares for money — so it is signed as a simple contract. Look at the execution block: Daniel Okoye signs for Meridian as a director, while Jonathan Hale signs for Atlas under a power of attorney granted five days before signing. (Some buyers ask for the SPA to be executed as a deed precisely to win the longer limitation period; sellers usually resist, preferring claims to die sooner.) A company can also execute deeds — by two authorised signatories, or a director signing before a witness — but the formalities are stricter, which is exactly why lawyers check execution blocks so carefully.

Signing itself has gone electronic. English law accepts electronic signatures for contracts — and, with care over witnessing, deeds — and clause 16.6 confirms both the counterparts mechanic and that an electronically signed counterpart is effective. But virtual signings follow a protocol, for good reason. In the Mercury case (2008), signature pages taken from a draft deed and attached to a different final version were held ineffective — a signature authenticates a particular document, not a floating page. Ever since, law firms have followed the Law Society and City of London Law Society guidance: circulate the final execution version; have each signatory sign that version, or return a signed signature page together with authority to attach it to the final agreed document; and record the sequence by email. The protocol is what makes an avalanche of signing PDFs stick.

10.6A junior’s first-read checklist

The next time an SPA lands on your desk, work through this before forming a single view:

• Read the contents page first and sketch the seven-layer map: front matter, definitions, the deal engine, risk allocation, boilerplate, schedules, execution.
• Find the price and how it can move: fixed sum, adjustments, interest, deductions (in Sunrise: clause 3.1 and the locked box).
• Find the conditions and the long stop date — is there a gap, and who bears the risk of it?
• Read the limitations (clause 9) before the warranties — the shield tells you how much the sword is really worth.
• Read every definition that carries weight — Disclosed, knowledge, Leakage — and keep a crib sheet of what each one really does.
• Read all the schedules, and check their interlocks with the body: defined terms, cross-references, agreed-form documents.
• Check the notices clause: addresses current? deemed-receipt rules understood? Diary every claim deadline against them.
• Check assignment and third-party rights — who besides the named parties can ever hold or enforce this contract?
• Check execution: right entities, right signatories, right formalities — and which ancillary documents must be deeds.
• Write down every date and period in one list: locked box date, long stop, claim windows, covenant periods. Deals are lost in diaries, not courtrooms.

10.7The whole document, one line each

Finally, the tour in table form — each part’s job, and who typically fights hardest over it:

You now hold the map. The next two chapters descend into the SPA’s engine room: Chapter 11 takes on warranties and disclosure, and Chapter 12 the indemnities and tax covenant. First, test the map.