Wat is het verschil tussen signing en closing?

The difference between signing and closing in M&A transactions lies in their timing and legal significance. Signing occurs when parties execute the purchase agreement, creating binding contractual obligations. Closing happens when ownership actually transfers and the transaction completes. This two-phase structure allows time for fulfilling conditions precedent, regulatory approvals, and final preparations before the deal becomes irreversible.

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

Signing represents the contractual commitment phase where parties execute the definitive purchase agreement, whilst closing marks the actual ownership transfer and transaction completion. The signing creates legally binding obligations for both buyer and seller, establishing the framework for completing the deal. However, no money changes hands and no ownership transfers at signing.

Closing occurs when all contractual conditions are satisfied, funds are transferred, and legal ownership officially changes hands. This represents the point of no return where the transaction becomes final and irreversible. The period between these two milestones can range from several weeks to many months, depending on the complexity of conditions that must be fulfilled.

This dual-phase structure serves critical legal and practical purposes in M&A processes. It provides both parties with protection and time to ensure all requirements are met before the irreversible transfer of ownership occurs. Understanding this distinction is essential for managing expectations and planning throughout the transaction timeline.

Why do M&A deals have separate signing and closing dates?

M&A transactions require separate signing and closing dates to accommodate regulatory approvals, financing arrangements, and due diligence completion that cannot be finalised before contractual commitment. This two-phase structure provides essential risk management and allows parties to secure binding agreements whilst addressing complex prerequisites.

Regulatory approvals often represent the most time-consuming requirement between signing and closing. Competition authorities, industry regulators, and government agencies may need weeks or months to review and approve transactions. These approvals cannot be obtained before parties commit to the deal, yet they remain essential for completion.

Financing arrangements frequently require finalisation after signing, particularly in leveraged buyouts or complex corporate finance structures. Lenders need signed agreements before providing final funding commitments, creating a natural sequence where signing precedes financing completion.

The gap also allows for final due diligence verification, third-party consent collection, and integration planning. This period enables both parties to prepare thoroughly for the ownership transition whilst maintaining contractual certainty about the transaction terms.

What happens during the period between signing and closing?

The interim period involves fulfilling closing conditions, obtaining regulatory approvals, finalising financing arrangements, and preparing for ownership transition. Both parties work systematically through predetermined requirements whilst maintaining normal business operations under agreed constraints.

Regulatory filings and approval processes typically dominate this phase. Companies submit required documentation to competition authorities, industry regulators, and other relevant agencies. These processes follow strict timelines and procedures that cannot be accelerated beyond regulatory requirements.

Financing finalisation occurs simultaneously, with lenders completing their due diligence and documentation. Debt facilities are arranged, equity commitments are confirmed, and all funding sources are coordinated for the closing date. This ensures adequate capital is available when ownership transfers.

Integration planning accelerates during this period, though actual integration cannot begin until closing. Teams prepare operational transitions, communication strategies, and day-one requirements. However, the seller typically continues operating the business independently under normal course provisions in the purchase agreement.

Both parties also work to satisfy specific closing conditions, obtain third-party consents, and resolve any outstanding issues identified in final due diligence reviews.

What conditions must be met before closing can occur?

Typical closing conditions include regulatory approvals, financing confirmations, material adverse change clause satisfaction, third-party consents, and legal opinion deliveries. These conditions protect both parties by ensuring all prerequisites are met before the irreversible ownership transfer occurs.

Regulatory approvals represent the most common and time-sensitive conditions. Competition authority clearances, industry-specific regulatory consents, and foreign investment approvals must be obtained where applicable. These conditions are typically mutual, meaning either party can terminate if approvals are denied.

Financing conditions ensure the buyer has adequate capital to complete the transaction. These include debt facility availability, equity commitment confirmations, and satisfactory completion of lender due diligence. Financing conditions usually favour the seller, allowing termination if buyer funding fails.

Material adverse change clauses protect buyers from significant negative developments affecting the target company between signing and closing. These conditions require careful definition to balance seller certainty with buyer protection against unforeseen circumstances.

Third-party consents cover customer contracts, supplier agreements, leases, and other arrangements requiring approval for ownership changes. Legal opinions, corporate authorisations, and final documentation deliveries round out typical closing condition lists.

What are the risks if a deal fails between signing and closing?

Deal failures between signing and closing can result in break-up fees, reputational damage, market exposure, and lost opportunity costs for both parties. The signing party bears contractual obligations even if closing never occurs, creating significant financial and strategic risks during the interim period.

Break-up fees represent the most immediate financial consequence of deal failure. These fees typically range from one to three percent of transaction value and may be payable by either party depending on the failure cause. Reverse break-up fees protect sellers when buyers cannot complete due to financing or regulatory issues.

Reputational impact affects both companies but particularly impacts sellers who may struggle to restart sale processes after failed transactions. Market perception of damaged goods can reduce future valuations and limit buyer interest in subsequent processes.

Market exposure becomes problematic for sellers whose confidential information has been shared with failed buyers. Competitive intelligence, strategic plans, and financial details may compromise the company’s market position even without transaction completion.

Opportunity costs accumulate during extended interim periods, particularly for sellers who cannot pursue alternative transactions whilst bound by exclusivity provisions. Management distraction, delayed strategic initiatives, and employee uncertainty compound these costs over time.

How can professional M&A advisors help navigate signing and closing complexities?

Professional M&A advisors provide essential expertise in contract negotiation, condition management, timeline coordination, and risk assessment throughout both signing and closing phases. Their experience ensures smooth transaction execution whilst maximising value and minimising risks for all parties involved.

During the signing phase, advisors negotiate protective provisions, structure appropriate closing conditions, and establish realistic timelines for completion. Their expertise in drafting purchase agreements ensures balanced risk allocation whilst maintaining deal certainty for both parties.

Throughout the interim period, advisors coordinate condition fulfilment, manage regulatory processes, and troubleshoot emerging issues. Their relationships with regulators, lenders, and other transaction participants facilitate efficient problem resolution and timeline management.

Risk mitigation represents a crucial advisory function, with experienced professionals identifying potential obstacles before they become deal-threatening issues. This proactive approach includes structuring appropriate termination rights, break-up fee arrangements, and contingency planning for various scenarios.

The complexity of modern M&A transactions demands sophisticated expertise in corporate finance, regulatory requirements, and transaction management. Professional advisors bring this expertise alongside established networks and proven processes that significantly improve transaction success rates whilst protecting client interests throughout the signing and closing process.

Understanding the nuances between signing and closing phases enables better transaction planning and risk management. For companies considering M&A transactions, professional guidance ensures optimal outcomes whilst navigating these complex processes. We invite you to contact our team to discuss how our expertise can support your strategic transaction objectives.