In the complex and fast-paced world of business mergers and acquisitions (M&A), the creation of a comprehensive closing checklist is crucial. The closing checklist serves as a deal roadmap, ensuring that all critical steps are taken, and no detail is overlooked. A well-prepared closing checklist can significantly streamline the closing process, minimize risks, facilitate discussions, and get the parties working together to close the deal.

Tip #1: Detail All Required Documents

One of the first steps in drafting your M&A closing checklist is to list all required documents. Documents listed in the closing checklist should include any documents that will be signed and delivered at closing, including the purchase agreement, bill of sale, consents and resolutions, assignments, signature packets, and, when applicable, ancillary documents such as employment agreements, leases, releases, and equity agreements. Additionally, the closing checklist should identify any documents that are to be delivered prior to closing, such as financing agreements, financial statements, third party consents, tax returns, key contracts, lien releases, insurance policies, and other documents requested during due diligence. Ensuring that your closing checklist clearly identifies every important document is essential for a smooth closing.

Tip #2: Outline Key Milestones and Deadlines

An effective M&A closing checklist should clearly outline all critical milestones and associated deadlines from start to finish. The closing checklist should act as a comprehensive deal timeline covering the entire lifespan of the deal, starting with initial agreements such as the letter of intent, through due diligence, to the final closing and any post-closing obligations. Anyone should be able to look at your closing checklist on any date and determine what work has been performed, what items remain outstanding, and the expected completion date for these items. Having clear timelines included on your closing checklist will keep your deal on track and progressing forward.

Tip #3: Identify Responsibilities

A key aspect of your M&A closing checklist is the clear identification of responsibilities for each task. Your closing checklist should specify who – be it on the buyer’s side, the seller’s side, legal counsel, financial advisors, or other stakeholders – is accountable for completing each item on the closing checklist. For example, the buyer’s legal teams may be responsible for drafting and reviewing transaction documents, while the seller’s accountants could oversee the preparation of financial statements. There may also be third parties such as financial institutions who are required to deliver documents prior to closing that should also be clearly identified on the closing checklist.  Effective delegation and responsibility tracking are vital to avoid duplicating efforts and uneventful meetings.

Tip #4: Remember Post-Closing Obligations

In drafting your M&A closing checklist, never overlook the post-closing responsibilities of the parties. A deal may have tasks and responsibilities that extend beyond the official closing, such as third-party consents, integration of operations, final financial adjustments, and other documents, filings, or transitional services that might be required after signing. For instance, in some cases, employees might need to sign documents that facilitate employee transitions to the new company or regulatory filings may need to occur. Remembering the post-closing phase when drafting your closing checklist ensures that all important issues are considered and addressed, allowing the parties to effectively and efficiently transition ownership and operations of the business.

Tip #5: Flexibility and Communication

Always remember to maintain flexibility and adaptability with your M&A closing checklists. M&A deals are dynamic, with circumstances and requirements constantly changing as the deal progresses. A closing checklist should not be a rigid document but rather a living tool that’s updated and adapted to include new information, unexpected developments, or changes in business or regulatory environments. Closing checklist should contemplate delays, such as with obtaining approvals or financing, and timelines may need to be moved up or moved back to keep the deal on schedule. Buyers and sellers should encourage open lines of communication and frequently share their closing checklists when updates and changes are made. To maximize the effectiveness of closing checklist, it must be treated as a flexible, collaborative document that is continually updated and adapted to the ever-changing landscape of the deal.

Conclusion

Drafting a comprehensive M&A closing checklist is an indispensable part of ensuring a successful business merger or acquisition. The closing checklist not only serves as a crucial guide through each stage of the transaction but also offers a sense of preparedness and control amidst the complexities of the deal. By utilizing these five tips, buyers and sellers can navigate the M&A process with greater confidence, precision, and cooperation, leading to more streamlined and effective negotiations tailored towards closing the deal. If you are a business that is in the process of drafting an M&A closing checklist and need legal assistance, the experienced attorneys at Jimerson Birr are more than ready to help.