We answer the most frequently asked questions about the Sale and Purchase Agreement (SPA) and the final stage of an M&A (Mergers and Acquisitions) transaction.
Because issues can arise during the SPA negotiation stage, including unfavorable due diligence findings, price renegotiations, negotiation fatigue, and external disruptions (financing difficulties, market changes, or shifts in strategy).
Difference Between LOI and SPA: The LOI (Letter of Intent) is a preliminary agreement, non-binding in most of its provisions, that outlines the intention to acquire a business and an indicative price range. The SPA (Sale and Purchase Agreement) is legally binding and sets out all the legal, financial, and operational terms and conditions required to complete the transaction.
Due diligence identifies potential risks, such as undisclosed debt, litigation, and regulatory compliance issues. Its findings determine the Representations and Warranties (R&W), purchase price adjustments, and conditions precedent included in the SPA.