It’s Not Over Until It’s Over
The final scheduled act in a transaction is usually the closing. The closing may be virtual or in person, and includes the signing of all documents so that the transaction can be funded (a fancy way of saying people write and/or receive checks and wire transfers as directed by the signed documents). And often the closing is not the last act.
Because most companies are very dynamic entities, whether product or service-focused. There can be daily or hourly changes in quantities and billable units that can only be estimated for the purposes of closing. Generally, there are some post-closing reconciliations in a variety of areas that are anticipated in the final definitive agreement. Here are some examples:
- Estimated billing based on anticipated service provision
- Estimated supplies and products in stock at the time of closing
- Estimated payables and receivables that need to be reconciled post-closing for accuracy
- Transfers of leases and/or facilities where issues may arise post-closing
One of the best ways to prepare is for both parties to acknowledge these potential areas for post-closing negotiations in writing. This usually creates a give-and-take atmosphere which makes negotiation less painful and more successful. Another strategy is the increasingly popular “holdback” provision, which sets aside a portion of the seller’s proceeds to make sure there are funds available if needed. Ultimately, both parties are trying to give each other reassurance at the moment when the risk may feel the greatest.