Company Acquisition (SPA) in Spain

Overview of a Spanish Company Acquisition

Acquiring a Spanish company is one of the most common routes for foreign investors to enter or expand in the Spanish market. Unlike greenfield investment, an acquisition brings an existing client base, workforce, contracts, and operating track record — but also inherited liabilities and integration challenges.

The legal instrument that governs a company acquisition is the Sale and Purchase Agreement (SPA), known in Spanish as the Contrato de Compraventa de Participaciones (for an SL) or Contrato de Compraventa de Acciones (for an SA). Spanish M&A SPAs are typically drafted in Spanish but bilingual versions are common in cross-border transactions.

Share Deal vs Asset Deal

Before drafting an SPA, the parties must decide on the transaction structure:

Share Deal (Compraventa de Participaciones/Acciones)

The buyer acquires the ownership interests in the target company. All assets, contracts, employees, and liabilities transfer automatically as part of the corporate entity. This is the most common structure in Spain.

Asset Deal (Compraventa de Activos)

The buyer cherry-picks specific assets and, optionally, assumes specific liabilities. Each asset must be individually transferred. Employees of the acquired business transfer under Article 44 of the Workers’ Statute (business succession), which provides employment protections that cannot be contracted around.

The choice between structures has significant tax implications (see the Mergers and Acquisitions entry) and should be agreed before the due diligence phase begins.

The SPA: Key Structural Components

1. Subject Matter and Purchase Price

The SPA defines what is being sold (shares, their percentage, class) and the purchase price. The price can be:

• Fixed: A set amount agreed at signing and paid at closing.
• Locked-box: The price is fixed by reference to a historic balance sheet, with the seller retaining economic benefits of the business from the locked-box date to closing, subject to leakage controls.
• Completion accounts: The initial price is an estimate, adjusted up or down after closing based on actual working capital, net debt, and other financial metrics measured at the closing date.

Completion accounts are more common in Spain for transactions where financial information reliability is uncertain; locked-box is preferred in PE-backed transactions with clean data rooms.

2. Conditions Precedent (Condiciones Suspensivas)

The SPA may be conditional on certain events occurring between signing and closing, such as:

• Regulatory approvals (competition clearance from the CNMC or European Commission)
• Sector-specific approvals (banking, insurance, media, energy)
• Third-party consents (key customer or supplier contracts with change-of-control provisions)
• Financing conditions (less common in professional M&A; more frequent in SME transactions)

3. Representations and Warranties (Manifestaciones y Garantías)

The seller makes factual statements about the target company — its financial condition, legal status, material contracts, employees, tax position, intellectual property, and absence of undisclosed liabilities. If any representation proves false, the buyer can claim indemnification for resulting losses.

Spanish SPA practice has converged significantly with Anglo-American standards, and international transactions routinely include lengthy warranty schedules. However, certain warranties must be framed carefully to align with Spanish legal concepts (e.g., warranty periods are subject to Spanish limitation rules; environmental warranties interact with Spanish environmental liability law).

Warranty and Indemnity (W&I) Insurance — whereby an insurer covers the buyer’s or seller’s exposure under warranties — is increasingly used in Spanish mid-market and large-cap transactions.

4. Specific Indemnities (Indemnizaciones Específicas)

Where due diligence identifies known contingent liabilities (pending tax inspections, litigation, environmental issues, Social Security shortfalls), the parties typically agree specific indemnities rather than relying on the general warranty framework. These provide dollar-for-dollar coverage for identified risks, with agreed caps, deductibles, and time limits.

5. Purchase Price Adjustments and Earn-Out Clauses

In transactions where the parties cannot agree on a fixed price — often because of uncertainty about future performance — the SPA may include an earn-out mechanism (see the dedicated Earn-Out Clauses entry). The earn-out formula, accounting definitions, and the post-closing operational covenants governing the seller’s management of the business during the earn-out period are typically the most heavily negotiated provisions of any earn-out SPA.

6. Closing Mechanics (Condiciones de Cierre)

Closing typically takes place before a Spanish notary when the target is an SL (participations transfer requires a notarial deed) or through a notarial or exchange process for an SA. At closing, the parties simultaneously:

• Sign the notarial deed of transfer
• Pay the purchase price (wire transfer confirmed)
• Deliver closing documents (resignations of outgoing directors, new board appointments, updated corporate books)

7. Post-Closing Covenants

The SPA typically includes post-closing obligations on both parties: confidentiality, non-compete restrictions on the seller, transitional services arrangements, and ongoing indemnification procedures.

Regulatory Considerations

• CNMC competition filing: Required for transactions meeting Spanish notification thresholds.
• Foreign investment screening: Acquisitions by non-EU/EEA investors above certain thresholds (or in sensitive sectors) are subject to prior authorisation under Spain’s foreign direct investment screening regime (Royal Decree-Law 8/2020 and subsequent regulations).
• Sector regulators: Banking (Banco de España / ECB), insurance (DGSFP), securities (CNMV), energy (CNMC energy), telecommunications.

Frequently Asked Questions

Is an SPA notarised in Spain? For shares in an SL, the transfer must be made in a public deed (escritura pública) before a notary. For an SA, shares transfer by endorsement (bearer shares are prohibited since 2017). The SPA itself can be a private document, but the actual transfer instrument for SL participations requires notarisation.

What is the standard duration of a Spanish M&A process? From opening of a data room to signing typically takes 8 to 16 weeks for a mid-market transaction, depending on due diligence complexity and negotiation dynamics. Regulatory approval can extend the signing-to-closing period by 2 to 6 months.

Can a foreign buyer acquire a Spanish company entirely remotely? Substantially, yes — data rooms are virtual, negotiations are conducted electronically, and powers of attorney allow foreign buyers to be represented by local counsel at notarial closings. The buyer’s representative needs a Spanish NIF (foreigner’s tax identification number) to register the acquisition.

What happens to employees when a Spanish company is acquired? In a share deal, employees’ contracts continue unchanged — the buyer inherits the existing workforce, terms, and obligations. Redundancies post-acquisition are subject to normal Spanish labour law and may require collective dismissal (ERE) procedures if the numbers are significant.

Are there tax implications for the seller in a Spanish company acquisition? Yes. The seller (if a Spanish resident) pays Corporate Tax (for a company seller) or IRPF (for an individual seller) on the capital gain. Partial exemptions may apply depending on the duration and size of the holding. Non-resident sellers are subject to non-resident income tax, often reduced by a double tax treaty.

How BMC Can Help

We advise buyers and sellers throughout the acquisition process: structuring the deal, coordinating legal and tax due diligence, drafting and negotiating the SPA, obtaining regulatory approvals, and managing the notarial closing. Our integrated team covers the full transaction lifecycle in a single engagement.