Most retiring principals' solicitors are good corporate solicitors who have not done many practice acquisitions. The country has perhaps two hundred firms of accountants changing hands in any given year, against many thousands of other private-company transactions; volume is the reason, not capability. Your solicitor will pick up the practice-specific points quickly if you brief them properly.
Read it before your first meeting with the solicitor and take the printed copy with you.
Contents
- Why this brief matters
- Warranty caps and time limits
- Retention test mechanics
- Employment commitments and TUPE
- Transitional services obligations
- Indemnity carve-outs
- Restrictive covenants
- Completion mechanics
- Escrow arrangements
- Clauses usually fine as drafted
- How to brief an unfamiliar solicitor
- Fees and timeline expectations
- What to do today
Why this brief matters
An SPA for a practice sale runs to forty to seventy pages. Maybe a third of it is conventional corporate boilerplate that any decent solicitor will mark up correctly without further direction. The remaining two-thirds contain the practice-specific clauses where the difference between a competent mark-up and a confident one is real money: a warranty cap that protects you for the right number of years, a retention test that does not turn fee growth into a clawback, restrictive covenants that let you do voluntary work for old clients without breaching the contract.
If your solicitor reads this brief before opening the SPA, they will know where to spend their attention. If they do not, you may end up paying them to spend equal time on every clause, including the ones that did not need it.
Warranty caps and time limits
Warranties are the seller's promises about the practice: accurate fee figures, no undisclosed PII claims, accounts true and fair, no pending tax disputes, and so on. The buyer relies on these warranties; if they prove untrue, the buyer can claim against the seller after completion. The warranty cap is the maximum exposure you carry, expressed as a percentage of the purchase price. The time limit is how long the buyer has to bring a claim.
Normal language. A general warranty cap of fifty per cent of the purchase price is conventional for practice acquisitions of this size. A two-year time limit on general warranties, with seven years on tax warranties, is normal. Specific carve-outs (fraud, fundamental warranties about title) are typically uncapped and longer. De minimis thresholds (no claim under £5,000) and basket thresholds (claims aggregate to £25,000 before any are payable) are normal and protect both sides from trivial disputes.
Unusual language. A warranty cap above fifty per cent is unusual unless the buyer is paying a strategic premium and wants strategic protection. A cap below thirty per cent is unusually buyer-unfriendly and unusual on a chartered-firm acquisition. Time limits longer than two years on general warranties (excluding tax) are buyer-aggressive.
Dealbreaker. Uncapped general warranties are a dealbreaker. So is a "knowledge" qualifier that requires you to warrant facts you could not reasonably know. Push to qualify warranties "to the seller's knowledge having made reasonable enquiry of the senior staff" rather than absolute.
Retention test mechanics
The retention test ties the deferred payments (typically the 25 per cent at month 12 and the 25 per cent at month 24) to client retention. The mechanics determine whether you receive the deferred payments in full, in part, or not at all. This is the single most negotiable clause in the entire SPA after the headline price.
Market range. Buyer-side templates run from 80 to 90 per cent retention thresholds, measured at the first anniversary or the second, with no clawback above the threshold and pro-rata clawback below it. The denominator should be the recurring portion of the acquired fee base only, never one-off projects. Some buyers test at multiple milestones; that is at the buyer-favourable end of the range.
Unusual language. A retention test that includes one-off fees in the denominator (so a year without an unusual project counts as fee shrinkage). A test that defines "lost" to include any client whose fee dropped at all (so a fee reduction from £4,000 to £3,500 counts as partial loss). Multiple measurement dates with multiple clawbacks. A test that bites the cash-on-completion or any earlier deferred tranche, rather than only the final tranche.
Dealbreaker. A retention test that is uncapped on the downside, or that allows the buyer to reclaim more than the deferred portion. The buyer's exposure on retention should not exceed the deferred consideration.
Where the Jack Ross structure sits. A single 85 per cent threshold, measured at month 24 post-completion, applied only against the final 25 per cent tranche. No clawback against the cash-on-completion or the month-12 tranche, ever. Sits at the seller-favourable end of the market range above. The mechanics of the natural-attrition adjustments are set out in the SPA and shared on request before exclusivity.
Employment commitments and TUPE
If your staff are employed by a limited-company practice, the sale of the company shares carries them across automatically. If you are selling assets out of a partnership or sole practice, TUPE (Transfer of Undertakings, Protection of Employment) applies and the staff transfer with their existing terms preserved. The SPA's employment commitments sit on top of TUPE and add buyer-side promises that go beyond the statutory minimum.
Normal language. A 12-month no-redundancy commitment from completion. Salary parity protected for the same period. Pension scheme either continued or matched (with any uplift cost borne by the buyer). Role mapping done before completion in writing, so each staff member knows where they sit in the new structure on day one.
Unusual language. "Subject to operational review" attached to any of the commitments above means the commitments are not commitments. "We will use reasonable endeavours to" attached to staff continuity is the legal version of a shrug. Reject these qualifications.
Dealbreaker. No employment commitments at all, leaving staff with TUPE protection only. A TUPE-only deal is a buyer who is planning a redundancy programme and does not want to say so.
Transitional services obligations
The Transitional Services Agreement (TSA) sets out what you do for the buyer between completion and the end of your formal involvement. The two questions to settle are how long, and at what intensity.
Normal language. Twelve weeks, three days a week tapering to one day, formally ending at month three with informal availability through to month twelve. Activities listed: joint client meetings on top accounts, operational handover on file management and software, payroll-and-supplier introductions, answering historical questions only the previous principal can answer.
Unusual language. Open-ended availability "as reasonably required". TSA periods longer than twelve weeks at full intensity. Buyer's right to call you in for unspecified additional days without further payment. Pro-rata fee adjustments for "underperformance" of the TSA.
Dealbreaker. A TSA structured as a multi-year consultancy that is described as part of the purchase price rather than as separate paid work. If the buyer wants you involved beyond month twelve, that should be a separate consultancy contract with its own day rate, not buried in the SPA at zero marginal cost to the buyer.
Indemnity carve-outs
Indemnities differ from warranties in two ways: they are pound-for-pound (no need to prove loss in the conventional sense), and they typically sit outside the warranty cap. Buyers will ask for indemnities on specific risks: known PII claims, ongoing tax disputes, pending litigation, lease dilapidations.
Normal language. Specific indemnities for specifically named matters disclosed in the disclosure letter. Time limits matching the underlying risk (six years for tax, run-off period for PII, lease term remaining for dilapidations). Caps on each indemnity individually where the underlying exposure is bounded.
Unusual language. A general indemnity for "any matter arising from the conduct of the practice prior to completion". This is a back-door warranty without a cap, and it should be resisted.
Dealbreaker. An indemnity for tax matters extending beyond the statutory limitation period. An indemnity for PII matters extending beyond the run-off cover period (typically six years). Both expose you indefinitely.
Restrictive covenants
The buyer will require you to agree not to compete with the practice for a defined period after completion. A reasonable covenant is enforceable; an unreasonable one is not (English courts strike down covenants that are wider than necessary to protect the legitimate interest of the buyer).
Normal language. No active solicitation of clients or staff of the acquired practice for five years. No setting up of a competing practice within a defined geographic radius (typically a 20-mile radius of the office) for three years. Carve-outs for accepting unsolicited approaches, for non-accountancy work, and for charitable or pro bono work.
Unusual language. Covenants extending to clients of the buyer's wider group (so you cannot work with anyone the buyer's parent firm has ever served). Geographic radii beyond 20 miles. Time periods beyond five years for non-solicitation, or beyond three years for non-compete. Restrictions on accepting employment with any accountancy firm, anywhere, full stop.
Dealbreaker. A non-compete drafted so widely that you could not, for example, do voluntary treasurer work for the village cricket club because it might be construed as "providing accountancy services". The carve-outs need to be specific.
Completion mechanics
How the deal actually closes on the day. Where the funds are sent, what is signed, what is delivered, and what triggers the obligation to pay.
Normal language. Funds sent by CHAPS to the seller's solicitor's client account on completion morning, against simultaneous delivery of signed share transfer (or asset sale documents), board minutes, resignations of outgoing directors, and the agreed disclosure letter. A defined cut-off time after which non-receipt triggers a defined remedy.
Unusual language. Completion conditional on post-completion verification (so funds may be released subject to a five-day check). Completion conditional on a third party's consent that has not yet been obtained. Two-stage completion where some payments are subject to events that have not happened yet.
Dealbreaker. Completion treated as conditional rather than binding once funds are sent. Once you have transferred the practice, the deal is done; any further payments are deferred consideration, not conditional on completion.
Escrow arrangements
Escrow is the parking of part of the purchase price with a third-party stakeholder (usually the buyer's or seller's solicitor) to cover potential future claims. Whether to use escrow at all is a negotiable point.
Normal language. A modest escrow (commonly five to ten per cent of the purchase price) held for twelve to twenty-four months, against potential warranty or indemnity claims. Released automatically on the anniversary if no claim has been notified. Held in an interest-bearing client account, with interest accruing to the seller.
Unusual language. Escrow figures above twenty per cent, especially when combined with separate retention-test clawback provisions (you would be exposed twice on the same risk). Escrow held by the buyer's solicitor only, with no neutral release mechanism. Escrow released only on positive instruction rather than automatically on time-limit expiry.
Dealbreaker. Escrow combined with deferred consideration where both can be reduced for the same trigger. Insist on either-or, not both.
Clauses usually fine as drafted
To save your solicitor from spending time where time is not needed, the following clauses are usually fine in their conventional form:
- Boilerplate definitions and interpretation.
- Governing law (England and Wales).
- Jurisdiction (English courts; or, occasionally, arbitration if both sides agree).
- Notices clauses (postal and email addresses listed).
- Counterparts and electronic signature provisions.
- Severability and entire agreement clauses.
- Confidentiality (already running from HoT; the SPA simply restates).
None of these are zero-attention; your solicitor will scan them. They rarely warrant negotiation.
How to brief an unfamiliar solicitor
If your solicitor has never done a practice acquisition, the questions to ask them at the first meeting are:
- Have you done any private-company share or asset sales in the last two years? (Practice acquisitions are mechanically similar to small private-company sales.)
- Are you familiar with TUPE in the context of asset sales? (Relevant if you are selling assets out of a partnership or sole practice.)
- Are you comfortable with retention-test clauses tied to recurring revenue performance? (Most corporate solicitors are; some are not.)
- Will you be doing the mark-up yourself, or delegating to an associate? (Either is fine; you want to know who you are paying for.)
- What is your fixed fee or fee estimate for a deal of this size? (Get this in writing before instruction.)
If they are honest about the gaps in their experience and willing to spend the first hour reading this brief and the SPA structure side by side, you have the right solicitor. If they are evasive about experience or quote a fee that suggests they will be learning the area on your time, get a second opinion.
Fees and timeline expectations
For a practice sale in the £250k to £750k purchase-price range, expect solicitor fees of £5,000 to £15,000 per side. Lower end for a clean asset sale with light warranty negotiation; higher end for a share sale with material warranty cap arguments and contested retention mechanics. Add VAT.
The negotiation itself typically runs to two to three rounds of mark-up between the solicitors, over four to six weeks. Round one is usually the buyer's solicitor sending the first draft and the seller's solicitor returning a marked-up version. Round two narrows the differences. Round three closes the remaining points, usually in a call between the two solicitors with their respective clients on standby.
If the negotiation is going beyond round three or beyond six weeks, something is wrong: either the parties are far apart on a substantive point, or one of the solicitors is over-engineering. Both warrant a direct principal-to-principal call to settle, ideally in week five.
What to do today
Three things, before you instruct a solicitor:
- Print this brief. Take it to the first meeting with the solicitor. It saves both sides an hour.
- Get a fee estimate in writing. "Five to fifteen thousand depending on complexity" is a fair range to expect; "we charge by the hour and we will let you know" is not.
- Decide which three clauses matter most to you. For most retiring principals, those are the retention test, the employment commitments, and the restrictive covenants. Tell your solicitor at the start which three you want them to focus on.
The clauses we have flagged as dealbreakers are dealbreakers because we have seen them used to chip the price after exclusivity. Everything else is negotiable in the normal way.
Related reading
- Ten questions to ask any buyer before exclusivity the screening test to run before you sign exclusivity.
- Reading a Heads of Terms a clause-by-clause decoder for the document that comes before the SPA.
- A clean structure, not a leveraged earn-out the 50/25/25 mechanics with worked examples.
- Your staff are not a redundancy line item to us the SPA-side commitments and the year-two operating assumption.