After completing deal structure negotiation and due diligence, your firm is almost done with all the steps required to acquire another business. Though you’re close to finished, it’s not time to lose focus. With due diligence completed, your firm is ready to begin the second to last stage in the expansion through acquisition process: sign and closing. If you want to ensure you’ve covered every base in the sign and closing stage, learn more about how it works and its main elements.
If you need a refresher on all seven steps, you can review them below:
- Define your acquisition strategy
- Identify target companies
- Build a business case and develop financial modeling
- Due Diligence
- Deal Structure negotiation
- Sign and close
- Post-close integration
How Does the Sign and Closing Process Work?
At the beginning of the sign and close stage, due diligence is complete, and the legal team is underway with reviewing legal documents. These documents will include the purchase agreement, employment agreement(s), and other required legal documents based on the transaction type.
Usually, most buyers and sellers sign the legal documents and close the transaction on the same day. One decision you may consider instead is closing after signing the legal documents. Many buyers prefer this process because it gives them time between signing and closing to meet with clients and articulate transition both externally and internally. It also allows time to onboard employees, data, systems, and so on. Many sellers like the process for similar reasons.
During this time between signing and closing, you might also want to consider spending time speaking with the seller’s staff. By explaining your vision and culture to the seller’s staff, you’ll be more likely to retain them. Besides attempting to retain staff, you’ll want to rely on your attorneys, as they can offer solutions for each party to consider if there are financial concerns with signing and receiving payment at closing.
Details Required for Closing Documents
Many schedules and details are required for closing documents. Most of these will be provided by the seller, so be sure to include time for your review of schedules. Many sellers have never done this before, and if they do not have an advisor to assist with preparing the schedules, they may not have the know-how or resources.
While you cannot prepare these schedules for your seller, you can offer feedback or require certain formats and information. Below are a few examples of schedules and details that may be required:
- Fixed assets
- Contracts
- Prepaid expenses
- Excluded assets
- Accounts receivable aging
- Work-in-process aging
- Seller employees
- Key employee retention agreements
- Pending litigation
- Financial statements
- Encumbrances
- Insurance
- Intellectual property
- Allocation of purchase price
Since there are various types of schedules in the exhibit section of the purchase agreement, communicate the list of schedules required during the final days of the due diligence process. The seller will have more time to prepare, and it will give you the bandwidth needed to review the schedules before closing. Some schedules are updated just before closing, so having the format approved beforehand can be especially helpful.
Legal Language Negotiation
Once the documents are drafted and distributed for everyone’s review, you’ll move on to legal language negotiation, in addition to other deal points. The attorneys will discuss issues, and if they are unable to conclude, the buyer and seller may need to meet with the legal team to align with open issues.
Post Closing Celebration
The closing can feel like a non-event after all the hours, discussions, and resources put into this process. Schedule a short celebration even if you can’t hold one in person. We have been a part of several virtual toasts in the past few years, and while they’re not the same as those in-person, virtual celebrations are better than not celebrating such an eventful milestone.
Need Help Signing and Closing a Deal? Choose Thinc Strategy
When you need assistance closing a deal or want expert guidance through every step of the expansion through acquisition process, Thinc Strategy’s certified merger and acquisition advisors are ready to help. With our extensive history of assisting with market expansion strategy and business ownership transitions, we can help you define your acquisition goals, identify your top prospects, and ensure the entire acquisition process runs as smoothly as possible. If you want to schedule a complimentary merger and acquisition advisory service consultation, please contact us today.