Glossary
A policy that shifts the risk of a warranty breach from the seller to an insurer, now a standard feature of European deal-making.
Recent Trends
Private equity firms now account for a significant share of global M&A activity, using leveraged buyout structures to acquire and restructure businesses. National security reviews have become a major consideration: the UK's National Security and Investment Act 2021 gives the government power to scrutinise and block deals in sensitive sectors. ESG considerations increasingly feature in due diligence, and warranty and indemnity insurance (W&I insurance) has become standard in European deal-making, shifting risk from the seller to an insurer. Cross-border deals face additional complexity from diverging sanctions regimes and foreign direct investment screening.
SPA (Share Purchase Agreement)
The primary contract governing the sale and purchase of shares in a target company, setting out price, warranties, and completion mechanics.
Due Diligence
The investigation process where a buyer examines a target's legal, financial, tax, and commercial position before committing to a transaction.
Warranty
A contractual statement of fact by the seller about the target company — if untrue, the buyer may claim damages for the resulting loss.
Indemnity
A pound-for-pound reimbursement obligation for a specific identified risk, offering stronger protection than a warranty claim.
Completion Accounts
A price adjustment mechanism where the final purchase price is determined by accounts drawn up shortly after completion, reflecting the target's actual financial position.
Locked Box
An alternative pricing mechanism where the price is fixed by reference to a set of accounts at an agreed date before signing, with protections against value leakage.
Condition Precedent
A requirement that must be satisfied (e.g., regulatory approval) before the parties are obliged to complete the transaction.
Material Adverse Change (MAC)
A clause allowing a buyer to walk away if a significant negative event affects the target between signing and completion — heavily negotiated and rarely invoked.