Mergers and acquisitions are important milestones for SMEs, but the terms “signing” and “closing” are often used interchangeably. Both are crucial stages in the process, but each has their own role and dynamics. Signing puts the key agreements in writing, whereas closing marks the moment when the transaction is actually completed. Yet the road from signing to closing is not without risk: terms such as approvals, financing or specific carve-outs can make or break a deal. In this article, we explain and discuss the differences.
What is Signing?
Signing is the time at which the parties formally agree to the terms of the merger or acquisition. Upon signing, the contract is signed and all commercial, legal and financial terms are laid down in writing. This is an important moment (and often the date on which beneficial ownership is transferred), but it does not mean that the legal ownership of the company already changes at that time. It merely confirms that the parties will abide by the agreed terms. Further steps may be required after signing, such as obtaining regulatory approvals or arranging financing. For SMEs, this is a sign that the negotiations are complete, but the actual implementation of the deal is still to come.
What is Closing?
Closing is the time at which the merger or acquisition is actually completed. This involves the formal transfer of ownership of the business, payment of the purchase price and completion of all terms and approvals. That is when the actual legal transfer takes place. For SMEs, closing means transferring all rights and obligations to the new owner. However, risks may still materialise in the period between signing and closing, such as changes in the market or legal complications that affect the deal.
The Intermediate Phase: From Signing to Closing
The time between signing and closing can vary from several weeks to even months. This is a crucial phase in which all preparations must be completed, such as the final parts of the Due Diligence, financing, and obtaining the necessary approvals. For SMEs, it is essential to work closely with legal and financial advisors at this stage. Any delays or complications could still jeopardise the deal at the last moment. It is therefore important to monitor this phase carefully and be well prepared for all possible scenarios.
Conclusion
Both signing and closing are essential steps in the process of mergers and acquisitions, but they mark different moments and involve different risks and responsibilities. It is critical for SMEs to understand the difference and work closely with experts to ensure that the transaction is completed successfully. If you are involved in a merger or acquisition, then you must make sure that you thoroughly understand the processes of signing and closing to minimise risks and maximise benefits.
If you are about to execute a merger or acquisition and want to make sure your transaction goes smoothly, feel free to contact our Corporate Finance advisers. We are happy to guide you through every step of the process.