Stock Purchase Agreement
(Auction)

Summary

This template is a Stock Purchase Agreement (Auction) for use in the acquisition of all of the outstanding shares of a private company (the "Company") from its sole stockholder (the "Seller") for cash following an auction process (in which an investment bank solicits buyer bids on behalf of the Company). This template includes practical guidance, drafting notes, and alternate and optional clauses. The regulatory schemes that are addressed in this template are those that are generally applicable without regard to industry, such as anti-trust, tax, ERISA, environmental, anti-corruption, and federal securities regulation. This template assumes a delay between signing and closing, as is generally the case with complex transactions. In this way, the parties can enter into a binding acquisition agreement, following which they can, in mutually agreed fashion, address the regulatory and business hurdles to closing, such as governmental and contractual consents and financing matters. The template assumes that the Company is not the subsidiary of a group parent, and neither the Buyer nor the Seller is an S corporation. Accordingly, an IRS Section 338(h)(10) election will not be available to allow the parties to treat the deal as if it were an asset deal, thereby allowing the buyer to step-up the basis in the target company assets. In an auction, the purchase agreement is usually drafted by the Seller and revised by the Buyer as part of the Buyer's bid. The nature and extent of the Buyer's changes to the Seller's proposed contract will form a key element of its bid together with other factors including, most critically, the consideration offered by the Buyer, the likelihood of closing and, in bids with contingent consideration or consideration taking the form of debt or equity in the Buyer, the Buyer's financial strength. As a result, an auction purchase agreement is generally pro-Seller, which is reflected in this template. A Buyer should weigh each proposed pro-Buyer revision to this acquisition agreement against the impact the revision will have on the competitiveness of its bid, analyzed in light of the Buyer's overall proposal. The template has been prepared mainly with reference to a sampling of actual transactions in the current and recent auction stock purchase marketplace. Certain stock purchase agreement provisions will vary depending on the details of a particular transaction. The commentary is selective and does not attempt to provide a comprehensive guide to the innumerable legal and tactical issues that a practitioner may encounter in any specific transaction. The template is intended to be in accord with the provisions of the Delaware General Corporation Law. The parties are Delaware corporations. See Stock Purchase Agreement Basics for additional information regarding common structural and mechanical issues presented in most stock purchase agreements. For auction-specific considerations, review , Auction Process in M&A Deals and Buyer and Seller Considerations in M&A Auctions.