Does the COVID-19 pandemic, as part of an acquisition agreement, constitute a “significant negative effect” that triggers the buyer`s right of termination? Given the uncertainty between both parties, the time interval between signature and conclusion should be as short as possible. In addition, the agreed rights of withdrawal and performance requirements should be kept to a minimum. The signature itself does not necessarily entail the actual transfer of ownership, as certain conditions may be met. These “closing conditions” are agreed in the sales contract and must be respected before ownership rights are transferred from the seller to the buyer. Section 2 of this article contains further information and examples of closing conditions. In the early stages of an agreement, it is not certain that the closure will be postponed. In this case, you may need to design a deferred conclusion in order to keep your options open – it would be difficult to turn an agreement from a simultaneous signing and closing structure into a deferred closing structure. But if you find that you are able to sign and conclude at the same time, I would delete the contract accordingly. In a telephone conversation with an M&A partner of a law firm, I was reminded today that M&A contracts sometimes reflect a deferred conclusion, while the parties do proceed to simultaneous signing and closing.
What will be the impact of the target company`s operating agreements between the signing and conclusion of the pandemic? If all closing conditions are met, the agreement is ready to be concluded and the funds will be exchanged. This is the time when the transaction actually takes place. If the closing takes place after the signature, the contract usually contains obligations that must be fulfilled before the conclusion, conditions that must be fulfilled before the parties are obliged to conclude the transaction and termination clauses. These additional elements complicate matters considerably. It would be unfortunate to use a deferred closing structure for an agreement that uses simultaneous signing and closing – you would spend time building a sophisticated structure that would ultimately prove not only useless, but also add a confusing mess. This article shows what the difference is between signing and closing. It is also explained the applicable closing conditions and the point at which a buyer can reap the benefits of the acquired transaction or acquired assets. In the case of an M&A transaction with a forked signature and a conclusion in two, there is usually a long list of negative covenants that govern the activities of the target company during the transition period between signature and conclusion. .