The Basics Of Closing - Is it always necessary for the parties to sign the acquisition agreement prior to the closing?

Not necessarily. Sometimes, the parties will want to execute the agreement at closing, which is often referred to as a simultaneous signing and closing. This most often occurs when the buyer is financing the transaction internally, when no governmental approvals are required to consummate the transaction, or when the deal must close very quickly after the parties have reached their initial meeting of the minds—for example, to take advantage of the provisions of a soon-to-expire tax law or to enable a seller to obtain the sales proceeds in time to meet a debt retirement obligation. In some instances, the parties do not intend to sign and close at the same time, but end up doing so because they fail to reach a basic agreement until the closing date.

If the transaction is at all complex and requires governmental approval or third-party financing, the parties will most likely sign a letter of intent, negotiate and execute the acquisition agreement, and then proceed to close when the “Conditions to Closing” (often a section of the acquisition agreement) have been met and when the financing has been made available.

Government agencies may require a signed acquisition agreement before they will begin the process of transaction approval. Similarly, lenders may require that the terms of a transaction be established before they commit their resources to evaluating the transaction; in particular, they will want to know what representations and warranties are being made by the seller and the remedies available to the buyer in the event of a breach.