Share Purchase Agreement Ebitda

Determining the purchase price of the target company is a central theme of the contract negotiations. The parties must agree on the valuation and profitability of the target company, despite uncertainties about the future development of the economy. To account for this uncertainty, the compensation clauses provide for the purchaser`s obligation to pay, under certain conditions, an additional amount to the agreed purchase price (i.e. a variable “interest payment”) after the closing of the G.S.O. There are a few pitfalls to consider when agreeing or designing merit clauses. It is recommended not only to provide a precise calculation formula to determine the purchase price, but also to detail how the payment is calculated in order to avoid any manipulation of the calculation bases. If this is not the case, it is very likely that this will lead to disputes between the parties. Non-financial indicators, such as maintaining the customer relationship. B can be used to determine the variable elements of the purchase price (for example. B if the purchase price determination is based in one way or another on these customer relationships). In addition, from the point of view of the seller who loses control of the object of purchase, it is advisable to prohibit restructuring (for example. B a merger of the purchase object with another purchaser`s company) for a specified period or to authorize restructuring only if a prior agreement to adjust the income clause has been reached.

It is also recommended to define in the G.S.O. the decisions that the buyer makes or not regarding the management of the business sold, as well as decisions that can only be made with the consent/consultation of the seller. Financial and non-financial indicators can be used to determine the additional payment. Are you looking for a competent partner who can fully advise you on your M `A` transactions? Our MME M-A team is at your disposal to assist you in your transaction and to protect your interests in a holistic, proactive and pragmatic way. For more than a decade, there has been discussion about the revision of corporate law and therefore the establishment of the Virtual General Assembly. In particular, the financial indicators used in calculating payment of payments must be clearly defined in the G.S.O. Turnover is the simplest value that can be determined below financial ratios. Turnover, by its very nature, reflects only the result. On the other hand, costs are not included. The profit and loss account (for example. B EBITDA, EBIT, pre-tax income) or cash flow figures can be deducted from additional financial ratios.

EBITDA or EBIT are often used in conventional transactions because of their importance. The two financial indicators have in common to indicate economic profitability at the operational level, but, unlike sales, they take into account changes in costs. In general, in addition to the period required to determine whether the agreed-upon ratio has been reached (triggering payment), it is recommended that all obligations, control rights and advertising obligations (e.g. B, the length of time the person must make an initial assessment) and the possible delays of opposition. With respect to the agreed ratio, the parties must also agree on accounting principles and clear rules to determine the agreed financial ratio, for example.B.

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