SPA vs APA: What Sellers Should Know Before Selling

When founders begin preparing to sell their software company, the main focus is usually valuation. Price matters, but deal structure plays an equally important role. The structure you choose can influence tax treatment, integration steps, customer transition, employee continuity, and the overall experience after closing. At Solen Software Group, we spend meaningful time helping founders understand these differences so they can make informed decisions.

What an SPA Really Means

A Share Purchase Agreement (SPA)  is a structure where the buyer purchases the shares of the legal entity. The entire company transfers, including all assets, contracts, employees, intellectual property, and historical obligations. Operations continue under the same corporate identity, which often creates a smooth transition for customers and staff.

Founders often appreciate SPAs because the administrative burden is lighter. Contracts typically remain in place. Employees remain part of the same entity. Multi-year recurring agreements continue without being reassigned. For companies with a clean history and organized documentation, SPAs are a straightforward and effective structure.

What an APA Is and How It Works

An Asset Purchase Agreement (APA) is a structure where the buyer acquires specific assets rather than the legal entity itself. These assets often include the codebase, customer relationships, intellectual property, brand, and selected employees.

Founders choose APAs when they want clarity around what transfers and how the acquired company begins its next chapter. Because the entity does not transfer, the process may include administrative steps such as confirming customer agreements or documenting employee transitions. These steps are standard in many software transactions and simply ensure a clean and clear starting point.

APAs are widely used in software M&A and can create a strong foundation when structured thoughtfully.

Why Buyers May Prefer One Structure Over the Other

The choice between an SPA and an APA depends on the company’s history, contract structure, documentation quality, and goals for the transition.

• SPAs help maintain continuity for customers and employees• APAs create clarity around assets and can simplify future operations when historical complexities exist

Both structures can support successful outcomes. The decision is not about one being better than the other. It is about selecting the structure that fits the company’s circumstances and sets the transition up for success.

How Representations and Warranties Differ

Because SPAs transfer the entire legal entity, sellers often provide broader representations and warranties. They cover financials, compliance, contracts, and historical activities.

APAs typically focus on representations related to the assets being transferred. This can narrow the scope of risk, but it may also require more administrative coordination around re-contracting and employee onboarding.

Understanding these differences helps founders set expectations and avoid surprises during negotiation.

Structure Is a Strategic Choice

SPA vs APA should never be treated as simple legal paperwork. The structure affects how customers move over, how the team transitions, how the product continues, and how responsibilities are shared between buyer and seller. Selecting the right structure supports a calm and predictable process, both before and after closing.

In Summary

Structure influences more than mechanics. It shapes the lived experience for the founder, the team, and the customers after the sale. SPAs and APAs can both lead to excellent outcomes when chosen thoughtfully and supported by clear preparation.

If you are beginning to explore a potential sale and want clarity on which structure aligns best with your goals, the Solen team is always available for a simple, low-pressure conversation.