My company lives on public sector contracts and holds contractor classification: do I lose the contracts or the classification if I sell it, and how will the buyer value it?

Quick answer

Capittal's view is that if you sell the shares, you lose neither the contracts nor the classification: the contracting company stays the same and only its owner changes, provided it keeps its solvency and the tender documents contain no specific clauses. The risk arises if you sell assets or a business line, because then succession under article 98 of Spain's Public Sector Contracts Act (Law 9/2017) or assignment under article 214 applies, with solvency, classification and, for assignments, authorisation requirements. The buyer will mainly value portfolio quality: duration, concentration in one public body, margins and re-tender risk.

If I sell the shares, do I lose the contracts already awarded?

In principle, no. In a share deal, the legal entity that signed the contracts does not change: it remains the contractor, with the same rights and obligations. Law 9/2017 on Public Sector Contracts regulates contractor succession in mergers, demergers and transfers of a business or business line, but a simple change of shareholders is none of those. Even so, read the tender documents of each contract: some include duties to notify relevant changes or special conditions, and you want to know before signing.

What about the contractor classification? Does it survive the sale?

In a share deal, the classification belongs to the company and is kept, but it is not a lifetime seal. To keep it, the company must periodically show that it remains solvent: under article 82 of the Act, economic and financial solvency every year and technical and professional solvency every three years, through a formal declaration. If it is not filed on time, the classification can be suspended. A buyer who restructures the business, moves staff or resources to another group company or changes the financial structure must make sure that solvency is not weakened.

What changes if I sell assets or a business line instead of the company?

A lot. Article 98 of the Act provides that, in demergers, contributions or transfers of businesses or business lines, the contract continues with the entity to which it is allocated, which is subrogated, provided it has legal capacity, is not barred from contracting and has the solvency required at award, or the companies involved assume joint and several liability for performance. Otherwise, the contract is terminated as if through the contractor's fault. The transaction must be notified to the contracting authority. If it happens during a tender, before the contract is signed, article 144 applies instead. And the classification does not travel automatically with the assets: the acquiring company must prove its own.

Can I assign the contracts to another company?

Only under conditions. Article 214 of the Act allows assignment if the tender documents provide for it and the assignor's qualities were not decisive in the award. Requirements include prior authorisation by the contracting authority (deemed granted if not resolved within two months), the assignor having performed at least 20% of the contract value, the assignee having capacity, solvency and, where required, classification, and execution in a public deed. It is a slow, case-by-case route, impractical for a broad portfolio.

How does a buyer value a company that depends on public contracts?

Recurring public sector work has value, but buyers examine it closely. These are the factors that weigh most:

Factor	Adds value	Reduces value
Concentration	Several public bodies and regions	One public body with a large share of sales
Timing	Long contracts and planned extensions	Expiries clustered in the short term
Renewal	Track record of re-awards	High re-tender risk with new competitors
Margins	Price revision clauses and stable margins	Fixed-price contracts with rising costs
Performance	No penalties or incidents	Penalties, claims or open proceedings

What will the buyer ask for in due diligence?

Expect a detailed review of the portfolio: awarded and live contracts, backlog still to be performed, expiry dates and extensions, price revision clauses, performance guarantees in place, penalties imposed, stakes in joint ventures (UTEs, which have their own rules on changes under article 69), the status of the classification and solvency declarations, and the absence of bars to contracting. The buyer will also check that it and its group raise no issues with the contracting authorities.

What is the next step if I want to sell a company with public contracts?

Prepare a "contract map": a table listing each contract, public body, value, term, extensions, margin, guarantees, penalties and key clauses in the tender documents. With that map, in most cases the preferred structure will be a share sale, to preserve contracts and classification. The NRRO group covers the legal review of tender documents and the tax side of the deal. This article is for guidance only and does not replace legal advice on your specific case.

Capittal Transacciones is an M&A mid-market boutique advising deals from 3 to 250 million euros from eight offices across Spain (Barcelona, Madrid, Girona, Lleida, Tarragona, Palma de Mallorca, Zaragoza, and Valencia), part of the NRRO group. Every deal is led directly by a partner, from start to finish. If you are thinking about selling, ask for a free and confidential valuation.