United States: Recent Trends In European SPAs And Comparisons With US Practice

Although today M&A practice in deals involving private targets in Europe and the United States has become largely standardised, in respect of the form of the share purchase agreement (SPA), considerable differences exist on some deal terms, including:

  • payment arrangements;
  • some representations and warranties;
  • closing conditions;
  • indemnification terms; and
  • dispute-resolution provisions.

The extent of standardisation and the underlying differences are borne out not only by individual experience but also by empirical studies on SPAs, including the European M&A Deal Points Study ('EDPS 2015') and a similar study on deals for private targets in the US ('USDPS 2015').1

An illustration of these points, discussed below, can provide a useful framework for practitioners in the US confronted with negotiating deals in Europe (with the help of local counsel), or vice versa.

Beyond serving that practical purpose, review of those differences helps to put in perspective how SPAs function and guidelines for negotiating them. The key functions of the agreement are to make the transaction happen at favourable terms and to reduce risks and costs and/or allocate them acceptably. An attorney participating in the negotiation of a deal should of course be able to identify what technical deal terms, including best practices used in other jurisdictions, will maximise his or her client's position. But the attorney should also keep in mind the overall priorities for the deal, which do not always dictate taking a maximalist position on each technical drafting point.

Of course, deals may vary significantly from one to another, and technical drafting choices can be dominated by economic considerations, including the relative bargaining power of the parties, so the observations set out below should be applied to concrete cases with caution.

Further, review of European M&A practice must take account of the differences in legal systems among European countries, which may be more significant than the differences in the law of individual states in the US. In this connection, three points should be borne in mind:

  1. When negotiating an SPA the most important rule is the same whatever law is chosen: the parties' rights and obligations will generally be determined by the terms of the SPA, so careful drafting is essential.
  2. Although by virtue of European Union (EU) law2 and the domestic law of all or virtually all European countries the parties have freedom to choose the law applicable to their SPA,3 it is inevitable that the SPA will have to take account of the law of the countries where the target is incorporated (which is the applicable company law) and where it has operations (whose law will apply to such matters as its relations with its employees). Consequently, unnecessary confusion and complexity can be avoided by choosing the law of one of those countries. Indeed, in 77 per cent of the SPAs in the EDPS 2015 sample, the law applicable to the SPA was the law of the place of principal activity of the target.
  3. Although most of the key provisions in an SPA will be equally enforceable whether the applicable law is that of the country of the target, the buyer or the seller or some other country, there may be some issues – such as sensitive matters like sandbagging (see below) – on which the law of those countries will differ, and only local counsel can identify and advise on those points.

This article sets out below observations regarding: (1) standardisation, within Europe and with the US; and (2) some salient differences in SPA drafting between Europe and the US.

To view the full article click here

Footnotes

1 EDPS 2015 (co-chaired by the author of this article) was prepared under the auspices of the Market Trends Subcommittee of the American Bar Association's (ABA's) Business Law Section Mergers and Acquisitions Committee, which analysed 81 SPAs involving targets located in Europe or having substantial operations there, for a price of at least €15m, signed or closed in 2012 or 2013. It follows similar studies of SPAs in Europe ('EDPS') published in 2008, 2010 and 2013. This article draws on comparisons with similar ABA studies of SPAs for US deals for private targets ('USDPS') published in 2006, 2009, 2011, 2013 and 2015. All of these studies, as well as studies of Canadian deals, are available at http://apps.americanbar.org/dch/committee.cfm?com=CL560003. 2 EU Regulation 593/2008 of 17 June 2008 on the law applicable to contractual obligations (Rome I). It seems quite unlikely that after Brexit there would be any change in this rule in the United Kingdom.

3 An SPA is not among the types of contracts for which there are special rules as to choice of law (contracts relating to carriage of goods or passengers, consumers, employment or insurance, see EU Regulation 593/2008, Arts 3, 5, 6, 7 and 8).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions