How to Structure a Business Purchase Agreement Between Two Small Companies in Spain

In the context of Spanish commercial transactions, the sale and purchase of businesses is a common operation, even among entities whose annual turnover does not exceed the threshold of three million euros. Although these transactions may appear relatively straightforward, the lack of professionalized structures among the involved parties can generate substantial complexities during the negotiation process. Nevertheless, the decisive factor lies in the unequivocal willingness of the parties to complete the transaction, as this initial drive enables them to overcome potential obstacles and reach legally binding agreements.

1. Due Diligence as an Essential Prerequisite

Prior to formalizing the agreement, it is imperative to conduct a due diligence process, even if only at a basic level. This investigation allows the buyer to assess the financial, legal, and operational status of the target company, identifying potential risks and contingencies that could affect the business valuation. This pre-contractual transparency exercise not only serves as a safeguard for the purchaser but also lays the foundation for informed decision-making, thereby avoiding future disputes arising from omissions or inaccuracies in the disclosed information.

2. Defining the Contractual Object

Once the due diligence phase is completed, it is essential to precisely define the subject matter of the sale. This may include both tangible assets (machinery, inventory, real estate) and intangible assets (intellectual property, ongoing contracts, administrative licenses). A clear and exhaustive delineation of the scope of the transfer prevents misunderstandings between the parties and ensures legal certainty in the transaction.

3. Valuation Criteria and Price Determination

The price must be established based on principles of fairness and transparency, supported by objective data such as audited financial statements, asset and liability inventories, and reasonable economic projections. In this regard, it is crucial to disregard subjective or sentimental considerations, which hold no legal relevance in determining market value. Additionally, it must be noted that business valuation is subject to the laws of supply and demand and may be influenced by external factors unrelated to the company’s intrinsic performance.

4. Payment Terms and Guarantees

The contract must unequivocally establish payment conditions, including the total price, execution timelines, and, where applicable, adjustment mechanisms based on future performance. Furthermore, it is essential to incorporate guarantee clauses covering potential contingencies, such as undisclosed debts, pending litigation, or contractual breaches by the seller. These provisions serve as mutual protection mechanisms, mitigating the risks associated with the transaction.

5. Non-Compete Agreements and Transition Plan

It is common practice to include non-compete clauses in such contracts, whereby the seller agrees to refrain from engaging in similar activities within a defined geographic and temporal scope. Concurrently, the implementation of a transition plan is recommended to ensure business continuity, which may include, among other aspects, the temporary retention of management teams or post-sale technical assistance.

6. Limits in Risk Coverage

Although the contract should anticipate as many scenarios as possible, it is materially impossible to cover all eventualities. In low-value transactions, the implementation of complex guarantees (such as escrow deposits or insurance policies) may prove disproportionate in terms of cost-effectiveness. In such cases, the parties must strike a reasonable balance between protecting their interests and ensuring the economic feasibility of the transaction.

7. Post-Contractual Considerations

Once the sale is finalized, the resulting company will face challenges inherent to its new scale. Firms such as RLD, specializing in corporate advisory services, not only facilitate the transaction but also support the newly formed company in its growth, helping it professionalize, structure, and prepare for new challenges.

8. Importance of the Labor Factor

Human capital undoubtedly constitutes the most valuable asset in any such operation. The stability and commitment of the workforce are decisive for the success of the consolidated company. Therefore, it is crucial to align the interests of all stakeholders, fostering an organizational culture oriented toward shared value creation.

9. Variations Depending on the Parties’ Profile

When the transaction involves larger or more professionalized entities, the negotiation process acquires a higher degree of sophistication, requiring the involvement of multidisciplinary teams (legal, financial, technical). However, even in lower-value transactions, prior experience on either side may demand a greater level of rigor in drafting the agreement. Thus, specialized legal counsel becomes a necessary investment to ensure the legal robustness of the operation.

Conclusion

In summary, the proper structuring of an intercompany purchase agreement requires not only an in-depth understanding of applicable regulations but also a strategic vision that anticipates and manages the inherent risks of such transactions. In this context, the involvement of legal advisors specialized in commercial law proves to be a critical factor for the success of the deal.