Vendor loan
A loan from the seller to the buyer that defers part of the purchase price and is repaid over time.
With a vendor loan the seller finances part of the purchase price itself by deferring that amount. The buyer repays the deferred part with interest over an agreed period. The instrument bridges financing gaps, signals confidence in the target company and can be combined with an earn-out.
For the seller the vendor loan means a credit risk, which is managed through security, a pledge of the shares or a subordination arrangement towards the financing banks. The terms, interest and security are recorded in the share purchase agreement or in a separate loan agreement, frequently flanked by an escrow.
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This explanation gives a general overview of Austrian law and does not replace advice in an individual case. The specific circumstances of your transaction are always decisive.
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Earn-out
A variable component of the purchase price that depends, after closing, on the future economic performance of the target company.
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Escrow
The holding of part of the purchase price by a neutral third party to secure claims arising after closing.
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Closing
The completion of the transaction at which, once all conditions are satisfied, the shares are transferred and the purchase price is paid.
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Share purchase agreement (SPA)
The central agreement governing the acquisition of a business (share or asset deal), covering the object of sale, purchase price, warranties and completion.
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