Share Purchase Agreement Price Adjustment Clause

(f) An item to be negotiated is the one that draws up the final balance sheet, the buyer or the seller. The target company`s balance sheet could be very different at the end of the year and the adjustment could be surprising. The seller will want to draw up the final balance sheet because he can know more about business and finances. The purchaser will want to prepare the balance sheet of the financial statements because it provides the money to purchase the target entity, to operate the covered entity after the financial statements and so that the calculation of the final balance sheet is not carried out until a few weeks after closing. The party that presents the calculation has the advantage. In most cases, the buyer draws up the final balance sheet. Another key benefit of an earn-out clause is its use as a mechanism for engaging executives considered important to the future success of the goal. It is also important that these executives are not allowed to “play” an earn-out in a way where the business results match their incentive payments and not the best interests of the goal. The main advantage is to ensure price security for both parties. It exerts some pressure on the risk on the buyer, since the buyer must bear the risk of achieving the objective between signature and completion in the context of a SPA, although this risk can be managed by ensuring that there are, during this period, appropriate “no-leakage” safeguards, which concern a number of sales companies which generally prohibit the seller from certain acts likely to reduce the value of the transaction during the period of that period. However, careful consideration should be given to the practical remedies available to the buyer in the event of a breach of any of these obligations, since buyers do not wish to sue a seller for breach of the contractual obligation. We would tend to evaluate them for each transaction in a way that is economically pragmatic, but also offers the simplest judicial route, without having to resort to court or arbitration first. A common mistake is simply to rely on a contractual breach of a seller`s obligation, but we don`t think this provides an appropriate solution in this region.

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