The M&A Closing Process: A Banker's Guide

The M&A closing process covers the period from executed definitive agreement to legal completion — when consideration is paid, ownership transfers, and the transaction is recorded. For most mid-market transactions this window runs 4–12 weeks; for deals requiring regulatory approval, three to six months. Advisors who disengage after the share purchase agreement is signed leave their clients exposed during the period when deal value is most at risk.

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Signing vs. Closing: Why They Are Different Events

In many transactions, signing and closing occur simultaneously — the SPA is executed, funds transfer, and shares are registered in a single step. In others, signing and closing are separated by a gap of weeks to months.

When simultaneous close works:

• No regulatory approvals required
• No material third-party consents outstanding
• Financing is confirmed and available
• No significant pre-closing covenants to satisfy

When split signing/closing is required:

• Competition authority review (Hart-Scott-Rodino, EC merger control, ACCC)
• CFIUS review for foreign acquisitions of US businesses
• Material customer, supplier, or government contract consents
• Shareholder vote required
• Committed financing with internal credit approval outstanding

Which type of closing applies should be resolved at the LOI stage so both parties understand the timeline commitment before entering SPA negotiation.

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Conditions Precedent to Closing

Conditions precedent (CPs) are the specific, verifiable events that must occur before either party is obligated to close. They are detailed in the closing conditions section of the share purchase agreement.

Typical buyer conditions:

• Seller representations and warranties remain accurate at closing
• No material adverse change (MAC) in the business since signing
• Regulatory approvals obtained without conditions that materially impair deal value
• Required third-party consents received on material contracts, licenses, and permits
• Seller compliance with pre-closing operating covenants
• No injunction or order restraining closing

Typical seller conditions:

• Buyer representations remain accurate
• Evidence that buyer has available or committed financing
• No material adverse change in the buyer’s ability to consummate the transaction

Advisors should ensure conditions are objectively measurable. A condition that allows buyer discretion — “buyer satisfied with its confirmatory diligence” — is effectively an exit option and should be resisted in SPA negotiation.

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Regulatory Approvals: What to Plan For

For transactions above relevant size thresholds, regulatory approvals are the most significant and unpredictable source of closing delay.

Hart-Scott-Rodino (HSR): Required for US deals above the applicable size thresholds (adjusted annually by the FTC). The initial waiting period is 30 days after filing. A second request extends the review substantially — 6 to 12 months is not unusual for complex horizontal mergers.

EC Merger Control: EU-threshold transactions require notification to the European Commission. Phase I review takes approximately 25 working days; Phase II can extend 90 or more additional working days.

CFIUS: Mandatory or voluntary review for foreign acquisitions of US businesses with national security implications. CFIUS outcomes are difficult to predict and may require mitigation measures as a condition to clearance.

Multi-jurisdictional filings: Cross-border transactions often require parallel filings in multiple jurisdictions. According to McKinsey’s M&A research, regulatory timeline underestimation is the most common source of long-stop date pressure in cross-border mid-market transactions. Advisors should map the full regulatory landscape before signing and build realistic buffers into the long-stop date.

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Managing the Pre-Closing Period

Between signing and closing, the seller operates under covenant obligations. Standard sell-side pre-closing covenants:

• Ordinary course of business — continue operating without entering material new contracts, making capital expenditures above agreed thresholds, or taking actions outside the normal course
• Access and information — grant buyer access to the business, management, and data room for confirmatory diligence
• Employee restrictions — no termination of key employees or material changes to compensation
• Leakage restrictions — in locked-box structures, “permitted leakage” items are defined and all other value extraction is prohibited

Violations of pre-closing covenants can give the buyer grounds to refuse to close or seek price adjustments. Advisors should brief selling clients clearly on what ordinary course means in practice and flag any proposed actions that might constitute a covenant breach before taking them.

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Locked-Box vs. Completion Accounts

The pricing mechanism determines how the final consideration is calculated and whether post-close price adjustments occur.

Locked-Box Mechanism

Under a locked-box, economic risk and reward transfer on a historical balance sheet date — the “locked-box date” — set before signing. The purchase price is fixed as of that date. Permitted leakage items (dividends, management fees, and other pre-agreed value extractions) are defined explicitly in the SPA and deducted from the price. Anything outside permitted leakage is a breach.

Advantages: Price certainty for both parties; no contentious post-close accounting process; clean exit for sellers.

According to PwC’s deal advisory research, locked-box structures represent the majority of European mid-market M&A transactions and are increasingly common in North American deals above $100 million.

Completion Accounts Mechanism

Under a completion accounts mechanism, the purchase price is adjusted after closing based on the actual balance sheet at completion. A target amount for key balance sheet items — net working capital, net debt, and cash — is agreed at signing. Actual closing amounts are compared to targets and the price is adjusted up or down accordingly.

Key parameters negotiated:

• Definition of net working capital (which current assets and liabilities are included, and what is excluded)
• Target working capital level (the NWC peg)
• Timing for preparation and review of completion accounts (typically 60–90 days post-close)
• Dispute resolution process for disagreements on closing balances

Completion accounts require both parties to agree on final numbers post-close — a process that frequently generates disputes. The working capital adjustment is the most contested component of completion accounts in practice.

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Closing Day Mechanics

On closing day, a sequenced series of steps must occur:

1. Condition confirmation — both parties confirm in writing that all conditions have been satisfied or are being waived at closing
2. Closing deliverables — share transfer forms, board resolutions approving the transfer, resignation letters from outgoing directors, appointment of incoming directors, and ancillary agreements (transition services agreement, shareholder agreement if applicable)
3. Funds transfer — buyer initiates wire transfer; typically coordinated to occur simultaneously with share transfer and execution of key documents
4. Share register update — the company’s register of members is updated to reflect the new ownership
5. Post-close filings — notifications to company registrars, tax authorities, and regulatory bodies as required

Closing day logistics failures — missing resolutions, unconfirmed wire instructions, outstanding consent forms — are almost entirely preventable. Advisors should create a closing checklist with each deliverable assigned to a responsible party, confirmed status, and a designated point of escalation if an item is delayed.

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Post-Closing Obligations

Closing is not the end of the advisor’s engagement.

Working capital true-up: Under completion accounts structures, the parties must agree on the actual closing working capital. The true-up window is typically 60–90 days post-close. Disputes over the NWC definition or individual line-item treatment are common; advisors who allow imprecise NWC mechanics at the LOI stage will relitigate them here.

Escrow management: A portion of the purchase price — typically 5%–15% — is held in escrow for 12–24 months to secure indemnification claims. Advisors track escrow release dates and manage any warranty claims raised in this period on behalf of the selling client.

Transition services agreement (TSA): Where the target relied on shared services from the seller’s group, a TSA governs continued provision of IT, HR, finance, or operational services during a transition period. TSA scope, pricing, and exit timelines should be negotiated before SPA signing — post-close TSA disputes arise when these terms are left vague.

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Common Sources of Closing Delay

Regulatory extensions: HSR second requests or competition authority in-depth investigations extend timelines by months with little the parties can do. Build regulatory risk into the long-stop date — a 6-month long-stop is inadequate if a second request is probable.

Third-party consent delays: Material customer contracts, government licenses, and change-of-control provisions in key agreements create bottlenecks. Identify consent requirements during due diligence and begin outreach immediately after signing.

NWC disputes: Poorly defined working capital mechanics at the LOI stage produce completion accounts disputes that can extend 3–6 months post-close. Advisors should insist on resolving the NWC definition — including contested items like accruals, deferred revenue, and seasonal adjustments — before countersigning the LOI.

Financing conditions: Buyers who condition their closing obligation on debt financing availability create termination risk if credit markets shift or internal credit approval stalls. Sellers should push for unconditional equity commitments rather than financing conditions in LOI negotiations.

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The Advisor’s Closing Checklist

• Conditions precedent tracker updated with confirmed status for each condition
• Regulatory filing requirements mapped; long-stop date reflects realistic approval timeline
• Third-party consent requirements identified and outreach initiated at signing
• Pre-closing covenant compliance reviewed with seller management
• Closing deliverables list prepared with each item assigned to a responsible party
• Wire instructions confirmed with both parties’ finance teams
• Escrow agreement and escrow agent confirmed; amounts and release schedule documented
• Completion accounts mechanism understood and agreed by all parties before signing
• Post-close obligations (TSA scope, working capital true-up window, earnout period) documented
• Client briefed on closing day sequence and post-close obligations before closing date

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Related Resources

• M&A Share Purchase Agreement: Key Terms — the definitive agreement governing closing conditions and mechanics
• M&A Letter of Intent: Template & Advisor Guide — LOI terms that flow through to SPA and closing
• Exclusivity in M&A — the LOI provision that starts the SPA drafting period
• M&A Due Diligence Checklist — the diligence process that runs in parallel with closing preparation
• Data Room in M&A — documentation repository that supports closing deliverables
• M&A Deal Documents: Complete List — every document in the sell-side process
• The Sell-Side M&A Process — full process overview from mandate to close