Structuring an Acquisition: SPA, Completion & Earn-Outs

You have found the target, agreed a price and passed diligence. None of that closes a deal. What closes a deal — and decides who carries the risk after it closes — is the structure: whether you buy the shares or the assets, how the final price is fixed, what the seller stands behind, and how much of the money you actually pay on day one. Two acquisitions at the same headline price can leave the buyer in completely different positions, and the difference is entirely in the mechanics.

This guide is for UK operators and acquirers who have a target in sight and need to understand the buyer's side of deal structure before the lawyers take over — not to replace legal advice, but to walk into it knowing what the levers are and which ones protect you. It runs from heads of terms through to the Sale and Purchase Agreement, covers share versus asset purchase in the UK, completion accounts versus the locked box, warranties and indemnities and the disclosure letter, earn-outs and deferred consideration, escrow and retention, and the change-of-control checks that quietly decide whether the value you priced survives the sale.

The deal sequence: heads of terms to completion

An acquisition is not a single event. It is a sequence of documents, each narrowing what is still open, and understanding the order tells you when to push and when a point is effectively settled. Structure is decided early — by the time you sign the SPA, most of it is baked in — which is why the heads of terms matter far more than their non-binding status suggests.

The practical lesson is that the heads of terms deserve more attention than their "subject to contract" label implies. Sellers treat what is agreed in principle as morally binding, and reopening a structural point after exclusivity — say, moving from a locked box to completion accounts because diligence spooked you — reads as bad faith and burns trust you will need through to completion. Decide the shape of the deal before you sign heads, not after.

Share purchase or asset purchase

In the UK, the first structural fork is whether you buy the company's shares or its underlying assets, and the two are genuinely different transactions with different risk, tax and complexity profiles.

A share purchase means you buy the target company itself — its shares change hands and you inherit the whole entity: every contract, employee, licence, asset and liability, known and unknown. Continuity is the advantage. Contracts, leases and licences usually stay in the same company, so they do not need to be reassigned — subject to any change-of-control clauses that a change of ownership may trigger. The disadvantage is that you inherit history, including liabilities that diligence did not surface, which is exactly why warranties and indemnities matter more on a share deal.

An asset purchase means you buy specific assets and, usually, only specified liabilities — you cherry-pick what you want and leave the rest in the seller's company. You take less unknown risk, but you take on more transfer work: each contract may need the counterparty's consent to assign or novate, property needs conveyancing, and employees usually transfer automatically under TUPE whether you planned for them or not.

Share purchase vs asset purchase (UK)

The choice is rarely purely commercial. Tax drives much of it, and it interacts with the intangibles you are buying: a business whose value sits in transferable, owned intangible assets — registered IP, an assignable brand, documented processes — travels more cleanly through an asset purchase than one whose value is locked inside contracts that need a counterparty's consent to move.

Fixing the price: completion accounts versus locked box

Both parties agree a number, but the number they agree is not usually the number that changes hands, because the target keeps trading between signing and completion. Two mechanisms deal with that gap, and the choice shapes who bears the risk of what happens in between.

With completion accounts, you agree the price on a "cash-free, debt-free" basis with a normal level of working capital, then draw up an actual balance sheet at the completion date and adjust the price up or down for the real cash, debt and working capital on the day. The buyer gets the true position and pays for exactly what is there — but the mechanism defers final certainty for weeks, and disputes over how the completion accounts are prepared are one of the more common post-deal fallings-out.

With a locked box, you fix the price against a historic set of accounts — the "locked box" date — and the buyer takes the economic risk and reward of the business from that date forward, even though completion happens later. There is no adjustment and no post-close true-up. Certainty is the prize. In exchange, the buyer relies on a "no leakage" covenant: the seller warrants that no value has left the box between the locked-box date and completion except permitted, agreed items.

The rule of thumb: the more volatile or working-capital-heavy the target, the more a buyer benefits from completion accounts; the more stable and predictable it is, the more a locked box's certainty is worth. Whichever you choose, define working capital precisely in the SPA — an imprecise definition is where completion-account disputes are born.

Warranties, indemnities and the disclosure letter

This is the part of the SPA that protects the buyer, and it works only if you understand how its three moving parts fit together.

Warranties are contractual statements of fact the seller makes about the business — that the accounts are accurate, that there is no undisclosed litigation, that the company owns its key assets, that material contracts are in force. If a warranty turns out to be untrue and you suffer loss, you have a breach-of-contract claim for damages. Warranties do two jobs: they allocate risk, and they flush out information, because a seller who cannot honestly give a warranty must disclose against it.

Indemnities are a promise to reimburse you pound-for-pound for a specific, identified risk — a known tax exposure, a live dispute, an environmental issue. Unlike a warranty claim, an indemnity does not require you to prove loss or mitigate; it is a direct commitment to cover a named liability. Indemnities are how you ring-fence the specific horrors diligence uncovered but could not fully quantify.

The disclosure letter is the seller's counter-document. It qualifies the warranties by listing the things that would otherwise make them untrue — "warranty 12 states there is no litigation; disclosed: a customer dispute over invoice X." Anything properly disclosed cannot later be the basis of a warranty claim. This is why the disclosure letter is not a formality: it is the seller carving exceptions out of the protection you thought you had, and reviewing it line by line against the warranties is one of the highest-value hours in the whole process.

How the three fit together

For the deeper detail, see the glossary entry on Warranties and Indemnities and on the Disclosure Letter. Two practical points shape the negotiation. First, warranties are typically subject to caps and time limits — a maximum recoverable amount and a window (often shorter for general warranties, longer for tax) in which claims must be brought. Second, warranty and indemnity insurance has become common on larger UK deals, letting a seller exit cleanly while giving the buyer a claim against an insurer rather than chasing a vendor who has spent the proceeds.

Earn-outs and deferred consideration

Rarely is the whole price paid in cash on completion. Part is often deferred — and the shape of the deferral is a structural decision that shifts risk between buyer and seller.

An earn-out ties part of the consideration to the target's future performance: the seller receives further payments only if the business hits agreed metrics — revenue, EBITDA, retained customers — over an earn-out period, typically one to three years. Earn-outs do two useful things for a buyer. They bridge a valuation gap when the seller believes in a future the buyer will not fully pay for up front, and they keep the seller aligned and often involved through a handover, protecting the relationships and knowledge you are buying.

Deferred consideration is the broader category: any part of the price paid after completion. An earn-out is performance-contingent deferred consideration; a straight deferred payment is simply a fixed sum paid later, contingent only on time. A vendor loan note is a common form — the seller effectively lends part of the price back to the buyer, documented as a loan note repaid over an agreed term, sometimes with interest.

Ways to structure the consideration

For the full mechanics of vendor financing, see what is a vendor loan note. The connection to structure is that deferring consideration is also a financing tool: every pound not paid on completion is a pound you do not have to raise in debt or equity on day one, which is why the consideration split belongs in the same conversation as your funding plan — covered in how to finance a business acquisition.

Escrow, retention and holding money back

Even with warranties and indemnities in the contract, a claim is only worth as much as the seller's ability to pay it — and a seller who has spent the proceeds and moved on is hard to pursue. Retention and escrow solve that by keeping some of the price where the buyer can reach it.

A retention is a portion of the price the buyer holds back for a defined period — commonly to cover the risk of warranty claims or a completion-accounts adjustment. An escrow does the same job through a neutral third party: an agreed sum is placed with a solicitor or escrow agent and released to the seller only once conditions are met — the warranty period expires without claims, the completion accounts settle, or an earn-out target is confirmed. The mechanics of the account are set out in an escrow agreement covering how much, for how long, and who decides when it is released.

For a buyer, an escrow is worth more than a contractual promise because the money is already secured against your claims rather than sitting in the seller's bank account. The negotiation is over quantum and duration — enough held back, for long enough, to cover the realistic claim window without over-collateralising a deal the seller has earned. See the glossary entry on the escrow account for how these are structured.

Change-of-control: the checks that decide whether value survives

Structure the deal beautifully and you can still buy a shell if the value walks out the door on completion — because a change of ownership triggers clauses the seller never had to worry about. Change-of-control provisions are the quiet killers of acquisition value, and checking for them is a structural task, not a footnote.

A change-of-control clause lets a counterparty terminate, renegotiate or withhold consent when the ownership of the business changes. They hide across the contracts and licences that hold the target's value: a key customer contract that a change of control lets the customer exit; a critical supplier agreement that must be re-consented; a software or IP licence that terminates on transfer; a bank facility that becomes repayable; a lease that needs the landlord's consent; a regulatory permission that must be re-granted to the new owner. Each one can erase a slice of the value you priced — and on a share deal, where continuity is supposed to be the advantage, an overlooked change-of-control clause quietly removes it.

The reason change-of-control belongs in a structure guide is that it interacts directly with the share-versus-asset choice. On an asset purchase you already face consent for assignments, so change-of-control triggers are visible by design. On a share purchase they are easy to miss precisely because the company — and its contracts — carries on unchanged, right up until a counterparty reads the ownership register. The value you are buying is mostly intangible, and much of it lives in contracts whose change-of-control terms the accounts will never show you.

Putting it together

Deal structure is where a good price becomes a good deal, or fails to. Decide the shape early — the heads of terms bind you in practice long before the SPA does. Choose share or asset purchase on the balance of inherited risk, transfer friction and tax, not habit. Match the pricing mechanism to the target's volatility: completion accounts for the working-capital-heavy, a locked box for the stable and predictable. Widen the warranties, secure indemnities for what diligence surfaced, and read the disclosure letter as the seller taking protection back. Defer consideration where it bridges a valuation gap or eases funding — but draft earn-outs with diligence-grade care. Hold money back in escrow so your claims are worth something. And map every change-of-control trigger before you sign, because the most elegant structure protects nothing if the value walks out the door on completion.

If you are earlier in the journey, start with the buy-side hub and the guide on how to value a business you want to buy. If you are planning how to pay for the deal, read how to finance a business acquisition. And when you have a target and need to see the intangible value the accounts miss — before you structure the price around it — see Opagio Intangibles in action or see the pricing.

Ivan Gowan is Founder and CEO of Opagio. He spent twenty-five years in fintech, including at IG Group, before building Opagio to help operators see and evidence the intangible value in the businesses they own — and the ones they are about to buy. Meet the team.