Share Purchase Agreement Strategic Considerations

In a Canadian business share sale, the Share Purchase Agreement (SPA) is the cornerstone document that formalizes the transfer of shares from the seller to the buyer, detailing critical terms such as purchase price, representations and warranties, indemnities, conditions precedent, and post-closing obligations. The Letter of Intent (LOI), typically non-binding except for provisions like confidentiality or exclusivity, precedes the SPA and outlines key deal terms, serving as a framework for negotiations. In an auction process, where multiple suitors compete, a pivotal decision for sellers and their M&A advisors is whether to have their legal counsel draft the SPA and LOI or allow the buyer’s legal counsel to take the lead. This article examines the advantages of the seller drafting these documents as part of the auction process, particularly when shortlisted suitors submit their best and final LOI, contrasts this with allowing the buyer to draft the LOI and SPA, and highlights the strategic timing of introducing the SPA in a Canadian share sale.