A share purchase agreement (SPA) is a contract that sets out the conditions for the sale and purchase of shares in a company. The buyer, as a shareholder or director, follows in the footsteps of the seller, but employees, contracts, real estate, etc., remain the property of the company. It is therefore not necessary to transfer the company`s assets, so a sale of shares can often be carried out without the participation of third parties. A share purchase is therefore often much more discreet than an asset purchase. Earn-outs generally consist of additional conditional payments that can be made at the end of the execution of certain milestones related to the future performance and that expire on a given date. Earn-Outs reduce the risk of acquisition for a buyer and offer the seller a better price if they meet earn-out goals. Earn-outs can be financial (e.g.B. Achieve future revenue targets) or non-financial (e.g.B. key customers of the target are maintained after the operation) and can help resolve differences of opinion on the value of the target if, among other things, there are uncertainties about its future prospects, it is a start-up with limited financial results, but has growth potential, or where the seller will continue to run the business and where the buyer will continue to lead the future performance of the seller he has inserted a lot 100,000.
there are risks associated with mis-presentation of successes or simply inconsistent accounting and measurement methods; Therefore, earn-out rules must be carefully developed and very specific milestones, a clear earn-out period, a clear formula or method of determining the earn-out, a method of safeguarding the earn-out payment (for example.B. Fiduciary or guarantee) and post-closing covenants specific to the Earn-out. Therefore, an Earn-out can be considered as an additional payment for the achievement of agreed post-closing goals. Normally, there are two parties, but if the shares are held by several people, it is usually necessary for each shareholder to be a party to the agreement. Occasionally, when there are several parties, lawyers will give their details in a schedule separate from the agreement. When it comes to buying and selling businesses, one of the easiest ways to transfer ownership is by selling the company`s shares. This is because while the ownership of the business may change, the day-to-day operations of the business continue, with employees, contracts and ownership remaining in the business. The acquisition of shares represents the acquisition of the operational activity of a company. None of the existing contracts with the company change. When a shareholder sells his shares in a company, he achieves a total rupture of the relationship between him and the activity concerned.
However, the buyer will insist on a number of contractual commitments concerning the company (guarantees) that will continue to bind the shareholder after the sale. A company can withdraw shares by buying them back from existing shareholders (share repurchase agreement) and placing the shares back in the name of the company. This is most often done through well-established groups. It is usually only carried out if the company has enough cash to make the purchase while covering the operating costs. By withdrawing shares, equity is transferred to the company, thereby increasing the value of the remaining shares.