M&A Transaction Lifecycle: Between Signing and Closing

The M&A Transaction Lifecycle between signing and closing is the period when the buyer and seller work to satisfy the conditions required to complete a deal. This may involve obtaining regulatory approvals, securing third-party consents, fulfilling contractual obligations and preparing for the transfer of ownership.

Signing an acquisition agreement does not always mean the transaction is complete. Until closing takes place, both parties may have obligations to fulfil, and certain events can affect whether or when the deal proceeds.

For a broader introduction to mergers and acquisitions, read What Is M&A? A Beginner’s Guide.

Why Are Signing and Closing Separate in M&A?

Signing is when the parties execute the definitive transaction agreement, such as a Share Purchase Agreement (SPA) or Business Transfer Agreement (BTA). Closing is when the transaction is completed in accordance with the agreement, including the applicable transfer of shares or business assets and payment of the consideration.

These events may happen on the same day or at different times. When closing is delayed, the period between them becomes important because the parties must meet agreed conditions while managing legal, commercial and regulatory requirements.

What Happens Between Signing and Closing?

The work during this period depends on the transaction, its structure and the terms agreed by the parties. Common requirements include the following.

1. Conditions Precedent Must Be Fulfilled

Conditions precedent (CPs) are requirements that must be satisfied or, where permitted, waived before closing can take place. They are set out in the transaction agreement.

Depending on the deal, these conditions may include regulatory approvals, third-party consents, internal corporate approvals or the completion of specified actions. The parties generally monitor these requirements to determine what remains outstanding and whether closing can proceed.

A condition that remains unfulfilled may delay closing. The consequences depend on the agreement and applicable law.

2. Regulatory Approvals May Be Pending

Some transactions require approval from a regulator before they can be completed. In India, this may include approval from the Competition Commission of India (CCI), where the transaction is subject to applicable merger-control requirements. Foreign investment rules or sector-specific regulations may also be relevant.

The parties need to understand which approvals apply and comply with the restrictions that operate while approval is pending.

Where prior approval is legally required, implementing a transaction before obtaining it can raise gun-jumping concerns. Signing an agreement does not, by itself, mean the parties can begin implementing the transaction or transfer control.

3. Interim Covenants Govern Business Operations

An M&A agreement may contain interim covenants that apply between signing and closing. These provisions help manage how the target business operates while the buyer waits to complete the acquisition.

For example, the seller may be required to operate the business in the ordinary course and seek the buyer’s consent for certain significant actions. The exact restrictions depend on the agreement.

These obligations are intended to protect the agreed transaction while allowing the business to continue operating. They do not automatically give the buyer unrestricted control over the target before closing.

4. Third-Party Consents and Other Requirements Are Addressed

Certain contracts, licences or financing arrangements may require consent or notification when a transaction takes place. Whether this applies depends on the relevant contract, the transaction structure and applicable law.

The parties may also need to complete agreed corporate formalities, deliver documents or satisfy other closing requirements. Identifying outstanding items early can help reduce avoidable delays.

These requirements form part of the wider M&A process, which covers the stages involved in moving a transaction from initial discussions towards completion.

5. The Parties Monitor the Long-Stop Date

A long-stop date is the agreed deadline by which specified conditions are expected to be satisfied and closing to occur, subject to the terms of the transaction agreement.

If the deal has not closed by that date, the agreement may provide for an extension, termination rights or other consequences. The date does not automatically terminate every transaction. Its effect depends on the wording of the agreement and the circumstances.

Monitoring this deadline helps the parties assess delays and understand the contractual options available to them.

What Happens If Closing Conditions Are Not Met?

If one or more closing conditions remain outstanding, the parties must consider the relevant agreement and applicable law before deciding what happens next.

Depending on the circumstances, they may be able to extend the timeline, waive a condition where legally and contractually permitted, or take other steps provided for in the agreement. If a required regulatory approval is not obtained, the options may be more limited.

A buyer cannot necessarily withdraw simply because the transaction has become less attractive after signing. Whether a party can terminate the agreement depends on the contractual provisions, the facts and applicable law.

This is why the conditions, deadlines and consequences of non-completion need to be clearly addressed in the transaction documents.

What Happens at Closing?

Closing occurs when the applicable conditions have been satisfied or validly waived and the parties complete the agreed transaction steps. Depending on the deal structure, this may involve transferring shares or assets, making the agreed payment, delivering closing documents and completing required filings or formalities.

The precise steps vary by transaction. The structure of the deal also determines what is transferred to the buyer. For a closer look at these differences, read Asset Purchase vs Share Purchase: Choosing the Right Deal.

Why the Interim Period Matters in M&A

Understanding the M&A Transaction Lifecycle helps legal professionals recognise the issues that can affect completion, manage outstanding contractual obligations and appreciate the importance of carefully drafted transaction documents.

For legal professionals who want to apply these concepts to transaction documents and real-world deal scenarios, DealCraft Academy’s Practice Ready M&A Lawyer course offers an opportunity to develop practical M&A skills.

Frequently Asked Questions

What is the difference between signing and closing in M&A?

Signing is when the parties execute the definitive transaction agreement. Closing is when the transaction is completed after the applicable conditions have been satisfied or validly waived.

What are conditions precedent in an M&A transaction?

Conditions precedent are requirements specified in the transaction agreement that must be met or validly waived before closing. They may include regulatory approvals, third-party consents and corporate approvals.

How long does it take to close an M&A transaction after signing?

There is no fixed timeline. The period depends on the transaction structure, regulatory requirements, third-party consents and the conditions agreed by the parties. Some deals close on signing, while others take weeks or months.

Can a buyer withdraw from an M&A deal after signing?

Not simply because the buyer changes its mind. Termination rights depend on the agreement, the circumstances and applicable law. A party should assess the relevant provisions before attempting to terminate a signed transaction.

What is a long-stop date in an M&A agreement?

A long-stop date is the agreed deadline for completing the transaction or satisfying specified requirements. If closing has not occurred by that date, the agreement may provide for an extension, termination rights or other consequences.