The documents and approvals: NDA to SPA, and what each clause is for.
Nine documents carry a sale from the first anonymous letter to the wire. Founders tend to read two of them properly. This chapter is what each one does, which parts bind you, the clauses that move money, and the approvals – competition, investment screening, employee consultation – that can stop or delay a deal. It is a map of the legal architecture, not legal advice; the answer for your jurisdiction comes from your counsel.
- The letter of intent is the document founders underestimate most: mostly non-binding on price, and decisive in practice because exclusivity comes with it.
- The sale agreement is where a headline becomes a number – price mechanism, warranties, disclosure, indemnities, limitations, escrow or insurance, covenants and conditions.
- Whether a deal needs competition or investment-screening approval can depend as much on the buyer as on you; check every credible bidder before exclusivity.
In the order you will meet them.
| Document | What it does | Binding? | The clause to read twice |
|---|---|---|---|
| Teaser | One or two anonymised pages: sector, scale, growth, the shape of the opportunity. Enough to test interest, not enough to identify you. | No | Anything that identifies you by elimination. |
| Non-disclosure agreement | The buyer’s promise to keep what it learns confidential and use it only to evaluate the transaction; many also restrict soliciting your employees, and sometimes your customers, for a period, with enforceability that varies by jurisdiction. | Yes | Whether there is a non-solicitation of employees, and how far it reaches; the term (commonly one to three years); what happens to your data if talks end.1 |
| Process letter | The seller’s rules: timetable, what an offer must contain, how questions are asked, who may be contacted. | No | What you asked bidders to specify. A vague process letter produces incomparable offers. |
| Information memorandum | The company, its market, its numbers and its plan, written to survive a buyer’s committee. | No – and the buyer will confirm it did not rely on it; what it wants to rely on, it will ask you to warrant | Every number: it will be reconciled to the data room. |
| Indicative offer | A non-binding letter: price or range, structure, financing, timing, assumptions, diligence needs. | No | The assumptions and the structure, not the headline. |
| Letter of intent / term sheet | The chosen buyer’s terms, in outline, and the rules for getting to a signed agreement. | Partly – see below | Exclusivity: its length, its triggers, and what ends it. |
| Sale agreement (SPA) and disclosure letter | The contract: price and mechanism, conditions, warranties, indemnities, limitations, covenants. The disclosure letter qualifies the warranties with what the buyer has been told. | Yes | The limitations on your liability, and the definitions of cash, debt and working capital. |
| Ancillaries | Your employment or consultancy terms; a shareholders’ agreement if you roll over; a transitional-services agreement; the escrow agreement; the W&I policy. | Yes | In a shareholders’ agreement: drag-along, your class of equity, and who decides the next exit. |
| Closing memorandum and funds flow | The choreography of the day: conditions satisfied, deliverables exchanged, and every euro’s route from the buyer’s account to yours, your lenders’, the escrow agent’s and your advisers’. | Yes | The funds flow, line by line, against the sale agreement. |
Non-binding on the price, binding on the things that decide it.
A letter of intent is usually expressed to be non-binding, and on price, structure and the buyer’s obligation to proceed it largely is – though under Swiss and German law both sides owe each other good faith in the negotiation, and a party that breaks off in bad faith can be liable for the other’s wasted costs; counsel will tell you where that line is. The clauses that bind are a short list – confidentiality, each side’s costs, governing law, often non-solicitation, and exclusivity – the seller’s undertaking not to solicit or negotiate with anyone else for a period. Practitioners describe four to twelve weeks as the usual range; in one law firm’s database of private-equity deals, roughly 94% of exclusivity periods ran sixty days or fewer in 2021 and nearly 40% ran longer a year later.2 The period itself matters less than what has to be true before it starts and what ends it: a data room complete and verified, a buyer that has finished its commercial work, milestones that lapse the exclusivity if a draft agreement is not delivered on time.
The other thing a good letter does is specify. Price and the mechanism that fixes it; the treatment of cash, debt and the working-capital principle; the headline terms of any earn-out – metric, period, who controls what; management and retention terms; the approach to escrow or insurance; the conditions and the timetable. Everything a letter leaves for “the definitive agreement” is negotiated later, under exclusivity, from the weaker chair. The most specific letter of intent leaves the least to be renegotiated in the sale agreement – which is the point.
The founder’s letter-of-intent checklist · thirty-one questions to answer before exclusivity
- Price. What exactly does the headline refer to – enterprise value or equity value? What cash and debt assumptions sit behind it? How is working capital treated, and against what peg?
- Consideration. How much cash is actually paid at closing? What is deferred, and is it secured? What is contingent? What is rollover or buyer equity? What escrow or holdback is proposed, for how long?
- Earn-out. Which metric, on which definitions? Who controls the operating decisions that move it? What reporting and audit rights do you have? What happens if the buyer sells, reorganises or integrates the business?
- Rollover. What security are you receiving? What sits ahead of it? What governance and information rights come with it? What determines your next liquidity event, and who decides?
- You and your team. How long are you expected to stay, in what role, with what authority? Which retention economics are buyer-funded and which come from the price? What happens to employee options?
- Protection. What indemnity architecture is proposed – cap, basket, survival? Is warranty insurance intended, and who pays? Are known issues to be handled by specific indemnity or by price?
- Execution. Is financing committed or conditional? What diligence remains, on what timetable? Which approvals, consents and conditions stand between signing and closing?
- Integration and legacy. What does the buyer currently intend to integrate, and what to preserve? Which integration decisions could affect the earn-out? What happens to the brand, the product and customer relationships? Which commitments are contractual, which are governance rights, and which are intentions?
- Leverage. How long is exclusivity, what extends it, and what ends it? And what, precisely, are you receiving in exchange for it?
Nine places where the money moves after the toast.
- Price and mechanism.
The enterprise value, the bridge to equity value, and whether it is fixed by a locked box or trued up by completion accounts. The three definitions – cash, debt, normal working capital – are schedules to this clause and are worth more attention than the number. The price mechanism →
- Conditions precedent.
What must happen between signing and closing: competition clearance, investment-screening approval, third-party consents, financing, sometimes the completion of employee consultation. Each condition is a right not to close for the party it protects – most protect the buyer; regulatory clearances protect both. A “long-stop date” gives either side, usually the one not in breach, the right to terminate if the conditions are not met in time.
- Warranties.
Your statements that facts about the company are true: title to the shares, the accounts, contracts, employees, intellectual property, litigation, tax, compliance. Given at signing and often repeated at closing – a repetition sellers resist. They are not a promise the company is perfect; they are the allocation of risk for what turns out to be untrue.
- The disclosure letter.
Everything you have told the buyer that qualifies a warranty, so that a disclosed matter cannot become a claim. Sellers draft it; buyers try to narrow what counts as “fairly disclosed”. It is one of the most valuable documents you will write after the memorandum.
- Indemnities.
Euro-for-euro compensation for specific, identified risks – a tax exposure, a dispute – regardless of disclosure or knowledge. Narrow by design; a buyer asking for broad indemnities is asking for warranties without limits.
- Limitations.
The de minimis, the basket, the cap and the time limits – the arithmetic that decides how much of the price is really at risk and for how long. In Europe, about two-thirds of deals limit general claims to between twelve and twenty-four months; caps range from under 10% of the price to the full price.3 The market figures, in the structure chapter →
- Escrow, holdback or insurance.
What stands behind the warranties: a share of the price held by a third party, a deferred payment the buyer may set off against, or a warranty-and-indemnity policy that moves the risk to an insurer for a premium and a retention.3
- Covenants.
Yours: to run the business in the ordinary course between signing and closing, and afterwards not to compete or solicit for a period. Theirs: to pursue the conditions, and sometimes to run the business in a way that gives an earn-out a fair chance – the clause earn-out disputes are fought over.
- Material adverse change, law and disputes.
A MAC clause lets the buyer walk if something defined and serious happens before closing; it appears in 10% of European deals and 97% of American ones.3 Governing law and the forum for disputes – courts, or arbitration, which about a third of European deals choose – decide where a claim would actually be fought.3
Merger control and investment screening: a deal can need approval, and the buyer often decides whether.
Two gates can stand between signing and closing. Competition authorities review acquisitions above turnover or market-share thresholds; investment-screening regimes review acquisitions by foreign – and in some countries specifically state-controlled – investors in sensitive sectors. In Switzerland the turnover test needs at least two parties each with Swiss turnover of CHF 100 million or more, so a target below that level does not meet it whoever the buyer is. In Germany and Austria a large buyer’s turnover alone can bring a filing, because the target-side thresholds are low. Whether your deal is notifiable therefore depends on the buyer as much as on you, which is why it is checked for every credible bidder before a letter of intent, not after. The snapshot below is the technical detail; the timetable it implies belongs in the first week of a process, not the last.4
Regulatory threshold snapshot · CH, EU, DE, AT, ES, UK, US · last verified 2 September 2026
| Jurisdiction | Notification is required when |
|---|---|
| Switzerland | Combined worldwide turnover of at least CHF 2 billion, or combined Swiss turnover of at least CHF 500 million; and at least two of the undertakings each have Swiss turnover of at least CHF 100 million. Also where a party has previously been found dominant in a related Swiss market. |
| European Union | Combined worldwide turnover above €5 billion and at least two parties each above €250 million in the EU; or the alternative test at €2.5 billion worldwide with the three-Member-State conditions. No EU dimension if each party earns more than two-thirds of its EU turnover in one and the same Member State (national rules then apply). |
| Germany | Combined worldwide turnover above €500 million, one party above €50 million in Germany and another above €17.5 million in Germany; or the transaction-value test: combined worldwide turnover above €500 million, one party above €50 million in Germany, consideration above €400 million and a target with substantial German activity. A draft amendment published in June 2026 would raise the thresholds to €750 / 75 / 20 million; not yet enacted. |
| Austria | Combined worldwide turnover above €300 million, combined Austrian turnover above €30 million, at least two parties each above €5 million worldwide and at least two each above €1 million in Austria; or the transaction-value test at €200 million. |
| Spain | Acquisition of a share of 30% or more of a national market (with a €10 million target-turnover exemption unless the combined share reaches 50%); or combined Spanish turnover above €240 million with at least two parties each above €60 million in Spain. |
| United Kingdom | Target UK turnover above £100 million; or a combined share of supply of 25% or more; or one party with a 33% share of supply and UK turnover above £350 million. No jurisdiction where no party has UK turnover above £10 million. |
| United States | Hart-Scott-Rodino size-of-transaction threshold of $133.9 million for 2026, with size-of-person tests below $535.5 million. |
Investment screening is the second gate, and it is moving. Switzerland adopted an Investment Screening Act in December 2025; it is not yet in force, is expected to apply from 2027 at the earliest, and covers acquisitions of control in particularly critical sectors by foreign state-controlled investors only – private foreign buyers are outside its current scope.5 The European Union adopted a revised screening regulation in June 2026 that will oblige every Member State to run a mechanism with a common minimum scope – including artificial intelligence, semiconductors and critical infrastructure – and will apply eighteen months after it enters into force; until then the 2019 regulation and national regimes govern.5
What a sale legally requires you to tell your people, and when.
The answer depends on what is sold. In a share deal, the employer does not change, and in Switzerland, on the prevailing view, there is no statutory requirement to inform or consult employees about the sale of the shares.6 In an asset deal – the transfer of a business or part of one – Swiss law transfers the employment relationships to the acquirer automatically, unless an employee refuses, and requires the employer to inform the employees’ representatives, or the employees themselves, in good time before the transfer of its reason and its legal, economic and social consequences, and to consult them if measures affecting them are planned.6 Germany’s rule for business transfers is similar in effect and stricter in form – information in text form to each employee, a one-month right to object, and works-council involvement where the transfer amounts to an operational change; in companies with more than a hundred employees the economic committee must be informed of a takeover even in a share deal.7 Across the European Union the Acquired Rights Directive sets the floor for business transfers: rights transfer, the transfer is not itself a ground for dismissal, and representatives are informed in good time.8
The legal minimum and the right sequence are different things. Counsel decides the first; the second – who is told what, when, and in which words – is designed with you before market, alongside the confidentiality protocol, because employees learn about a sale either from you in an order you planned or from a rumour. Your employees, and the day they find out →
We are not your lawyers, and we do not replace them. What we do is make sure the commercial terms – price mechanism, structure, protection, exclusivity, timetable – are decided while you still have alternatives, so that the drafting records a negotiation rather than becoming one. How this reports to a board →
1 Term and non-solicitation lengths are practitioner convention (one to three years; employee non-solicitation commonly one to two years), not a dataset. Standstill provisions, where the target is listed, run similarly.
2 Goodwin, Durations in M&A Exclusivity Periods Increased Significantly Since 2021 (May 2023), from the firm’s private-equity deal database; sample and geography not disclosed. The four-to-twelve-week range is practitioner guidance.
3 CMS, European M&A Study 2024 (559 deals in 2023): limitation periods of 12–24 months in about two-thirds of deals; caps from under 10% of price (14% of deals) to the full price; MAC clauses in 10% of European deals against 97% in the US comparison; arbitration in 37%. One firm’s deals, one year.
4 Switzerland: Cartel Act Art. 9 (thresholds unchanged by the 2025 revision, which replaces the dominance test and is in force in 2027 at the earliest) – Homburger, Chambers Corporate M&A 2026. EU: Regulation 139/2004 Art. 1. Germany: §35 GWB; draft 12th amendment, June 2026 (Jones Day). Austria: §9 Cartel Act (CERHA HEMPEL, Lex Mundi guide, 2025). Spain: Art. 8 Ley 15/2007. UK: Enterprise Act 2002 as amended, CMA guidance CMA2 (October 2025). US: FTC, HSR thresholds for 2026 (effective 17 February 2026). Verified 2 September 2026; law-firm restatements where the statute itself was not machine-readable.
5 Switzerland: Investment Screening Act adopted by Parliament 19 December 2025; SECO states no applications can yet be filed and expects entry into force in 2027; scope per Homburger and Vischer summaries. EU: Council and Parliament agreement 11 December 2025, formal adoption June 2026 (Cleary Gottlieb); applies eighteen months after entry into force. Status as at 2 September 2026.
6 Swiss Code of Obligations Art. 333 and 333a, as summarised by Lenz & Staehelin (2021), Bär & Karrer (Swiss M&A, 2022: share deals trigger no statutory consultation) and Homburger (2026). A minority view influenced by EU case law exists; the common view is as stated.
7 German Civil Code §613a (1), (5) and (6); Works Constitution Act §111 and §106(3) No. 9a.
8 Council Directive 2001/23/EC, Articles 1, 3, 4 and 7. The Directive addresses transfers of an undertaking to another employer; a share sale leaves the employer unchanged and falls outside it.
Read the clauses before you need them.
Thirty minutes with a partner who has drafted and negotiated these documents from the buyer’s side: which terms will matter for your company, and which should be settled before exclusivity. Under NDA, no engagement attached.
Reading this with a live transaction in front of you? Ask a partner about the documents and approvals → No engagement, and no need to name the company.