Buying or Selling a Business: Transact with Confidence and at the Best Price

Business acquisition and sale (compraventa de empresas) is a corporate transaction in which ownership of a company or its productive assets is transferred from a seller to a buyer in exchange for an agreed consideration. In Spain, these transactions are structured as either a share deal (transmisión de participaciones) or an asset deal (transmisión de activos), each with distinct tax, legal, and liability implications governed by the Companies Act (LSC), the Workers' Statute (Article 44 for asset transfers), and the Spanish Corporate Income Tax Act (LIS). The purchase price and post-closing obligations are set out in a Share Purchase Agreement or Asset Purchase Agreement (SPA/APA), negotiated following a due diligence process that quantifies contingencies across tax, employment, and legal dimensions.

Selling a business is the most important financial transaction in most entrepreneurs’ lives. And unlike other business decisions, there is no margin to learn from mistakes: it only happens once. The price achieved, the warranties signed, and the tax structure chosen have economic and personal consequences that extend for years after closing.

Why the sale process is more decisive than the valuation

Valuation is the starting point, not the outcome. The actual price the seller achieves depends largely on how the sale process is structured and executed. A single buyer, negotiated privately without a competitive process, has all the negotiating leverage: they can take as long as they need, can use due diligence as a pressure tool to reduce the price, and know they face no competition. An organised process with multiple qualified buyers creates the competitive tension that maximises price and minimises contractual concessions.

The difference between a direct bilateral negotiation and an organised process with three or four qualified buyers can be 20% to 35% in the final price. Not because the company’s value is different, but because the negotiation dynamics are radically different. And in multi-million euro transactions, that percentage difference can represent more than a lifetime’s earnings.

How to prepare a business for sale

Many sales fall through or close at prices below potential because the seller did not prepare the business before starting the process. The most frequent problems are: tax contingencies from non-prescribed financial years that surface in due diligence and trigger a revaluation; key contracts (with major clients, critical suppliers or key executives) that are not formalised or contain change of control clauses giving the third party the right to terminate; excessive dependence on the owner’s personal relationships (which cannot be transferred in the sale); and incomplete or inaccurate corporate documentation.

The prior preparation process identifies these points and resolves them before the buyer finds them. The result is twofold: the offered price is higher (fewer risks = higher valuation) and the due diligence process is faster and less stressful for the seller.

The SPA: the most critical points

The Share Purchase Agreement (SPA) is the central contract of the sale. Beyond the price, the clauses with the greatest economic impact on buyer and seller are those governing post-closing adjustments and warranties.

The price adjustment mechanism determines how the final price is calculated from the provisional price: the locked-box system fixes the reference price at the date of the last audited accounts and protects against value leakage between that date and closing; the completion accounts system calculates the actual price at the closing date based on the closing balance sheet. Each mechanism has advantages and disadvantages for each party and must be chosen with full understanding of the implications.

Representations and warranties are the mechanism by which the seller assures the buyer that the business has no hidden problems. If something declared proves to be inaccurate, the buyer can claim indemnification within the warranty period (typically 18 to 36 months), subject to a maximum liability cap (typically between 20% and 100% of price). Negotiating the exceptions to warranties (disclosure letter) is as important as negotiating the warranties themselves.

The earn-out: opportunity and risk for the seller

The earn-out appears when the buyer does not trust the seller’s projections. The buyer pays a more conservative base price, and the seller can receive additional consideration if the business meets future targets. For the seller, the earn-out may be the route to achieving the total price they consider fair. The risk is real: from closing, the buyer controls the business and can make decisions that affect the earn-out targets without the seller having direct control.

The key to a well-designed earn-out is precision in defining the metrics (what is included and excluded from the earn-out EBITDA?), the buyer non-interference warranties, and the dispute resolution mechanism for when the parties disagree on whether targets have been met.

Employment aspects: Article 44 and business transfer

In asset purchases that include the transfer of a productive unit or business, Article 44 of Spain’s Workers’ Statute establishes the automatic subrogation of the acquirer in all of the transferor’s employment and social security rights and obligations. The buyer inherits current employment contracts, employees’ seniority, applicable collective agreements and outstanding social security obligations. There is no alternative: subrogation operates by force of law, regardless of what the purchase contract says. Employment due diligence must precisely quantify all employment and social security contingencies before closing so that the price reflects them adequately.

Business acquisition and sale advisory coordinates naturally with the mergers and acquisitions team when the transaction has additional complexity (subsidiary disposals, prior demergers, cross-border transactions), with valuations for technical price analysis, and with the tax planning team for optimal structuring of the seller’s returns. In transactions where the buyer requires bank financing, we coordinate with the lending institutions and the corporate finance team.

The decision framework: buy-side versus sell-side

The business acquisition process in Spain is structurally different depending on whether you are acting as buyer or seller — and our advisory approach mirrors that distinction. Buy-side mandates begin with target identification and commercial assessment; sell-side mandates begin with business preparation and value optimisation. Both converge at the negotiation and transaction execution stage, but the work that precedes that stage is fundamentally different.

For buy-side clients, the critical discipline is avoiding overpayment. Spanish private company acquisitions are frequently structured around EBITDA multiples that reflect vendors’ aspirational valuations rather than defensible financial performance. Our valuations team provides an independent assessment of normalised EBITDA, working capital requirements, and key business risks before any price anchoring occurs.

For sell-side clients, the objective is maximising value by preparing the business to withstand scrutiny. This means resolving audit findings, documenting revenue streams, cleaning the balance sheet, and articulating the growth story credibly. Companies that invest in pre-sale preparation consistently achieve higher multiples and shorter deal timelines.

Key due diligence areas in Spanish company acquisitions

Due diligence in Spanish transactions covers financial, tax, legal, and commercial dimensions. Our integrated team covers all four:

• Financial due diligence: Quality of Earnings analysis, working capital assessment, net debt definition, off-balance-sheet liabilities, and EBITDA normalisation adjustments.
• Tax due diligence: identification of historic tax exposures, assessment of AEAT audit risk, transfer pricing positions, and structural tax liabilities that survive the transaction.
• Legal due diligence: review of key contracts, regulatory licences, employment obligations, intellectual property ownership, and litigation contingencies.
• Commercial due diligence: market position analysis, customer concentration assessment, competitive dynamics, and growth assumption validation.

The output of due diligence is not just a risk register — it is the foundation of the purchase price adjustment mechanism, the warranty and indemnity (W&I) framework, and the earn-out structure where applicable.

Deal structuring in Spain: shares versus assets

The choice between a share deal and an asset deal has material consequences for both parties in a Spanish transaction. Share deals are simpler to execute but transfer all historic liabilities; asset deals allow selective acquisition of assets but trigger transfer taxes and operational complexity. The correct structure depends on the specific risk profile of the target, the applicable tax position of both parties, and the regulatory context of the business.

For real estate-intensive businesses, the Impuesto de Transmisiones Patrimoniales (ITP) implications of different acquisition structures are often decisive. For regulated businesses — financial services, healthcare, professional services — regulatory continuity requirements may limit structural optionality. Our corporate tax team advises on the optimal structure in each case.

Post-acquisition integration

A significant proportion of acquisition value destruction occurs in the 12 months after closing. Integration challenges — IT system incompatibilities, cultural friction, customer retention during ownership transitions, and management retention — are well-documented but frequently underestimated. Our post-acquisition support covers financial reporting integration, accounting systems migration, payroll consolidation, and CFO-level support during the critical transition period through our outsourced CFO service.

For private equity sponsors executing buy-and-build strategies, we provide ongoing corporate secretarial and entity management services for portfolio companies, maintaining the administrative and compliance infrastructure that enables efficient add-on acquisitions.

Contact our corporate advisory team for an initial discussion of your acquisition or divestiture objectives.