Critical M&A Contract Terms #10: Motivating the buyer to close

As we mentioned in our previous post in this series,  signing the contract is an important step, but it’s not the final step. It is possible to sign the contract and never close the deal. You will need to avoid contingencies to close it. Most important, you will need to create an urgency on behalf of the buyer to close. Ideally, you will sign and close simultaneously, but most often there are items that need to be addressed between signing and closing. If these items will take more than a week, you might be better off postponing until these items have been addressed and negotiated away.

 

Buyers often ask for a six-month lockup from signing, reasoning that they are committed to the deal and want to make sure there is enough time to manage all of the moving parts and get to closing. The problem is that the schedule will naturally expand to use all of the available time, and then be extended again. You’ll want to set a deadline and work towards it, making sure that you have enough teeth in the agreement that you have other options if you get stalled on your way to closing.

 

Remember these ten contract terms when you draft your contract and you’ll be that much closer to an optimal outcome when selling your company.

 

Posted by , Executive Vice President on 23 September 2015
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