In a phone call with a law-firm M&A partner today, I was reminded that sometimes M&A contracts reflect a deferred closing even though the parties actually do a simultanous signing and closing.
If the signing and closing are simultaneous, the contract would usually contain deal provisions, representations, indemnification provisions (unless the target is public), and boilerplate, as well as any post-closing obligations.
If the closing is scheduled to take place sometime after signing, the contract would typically also contain obligations to be performed before closing, conditions that have to be satisfied before the parties will be required to consummate the transaction, and termination provisions. These additional components greatly complicate matters. It would be unfortunate to use a deferred-closing structure for a deal that uses a simultaneous signing and closing—you’d spend time building an elaborate structure that ultimately not only proves to be useless but also adds confusing clutter.
In the early stages of any deal, it may be unclear whether the closing will be deferred. In that case, it may be that you have to draft for a deferred closing, so as to keep your options open—it would be awkward to convert a deal from a simultaneous-signing-and-closing structure to a deferred-closing structure. But if you find that you’re able to do a simultaneous signing and closing, I’d then strip down the contract accordingly.
I recall someone’s once suggesting that even with a simultaneous signing and closing, it’s best to use a deferred-closing structure because it’s useful to have the contract contain a list of closing conditions—in this context, that means a list of (1) anything that would have to be in place before the parties sign and (2) any items to be exchanged at signing. But you can incorporate that kind of list without imposing on the contract an all-out deferred-closing structure.