What if new information surfaces between signing and closing a business deal?

If your agreement leaves a gap between signing and closing, the business keeps running during it. Something may change in that gap, or you may learn something that was there all along. Your options come from the contract, so the first step is to read it, not to react to the news.

Closing conditions

BDC says that in most acquisitions there is a period between signing the purchase agreement and closing, and that the closing conditions are undertakings the vendor completes in that period for the deal to close. Its examples include a lease or contract that needs a third party’s consent to transfer. Check whether the new problem touches a listed condition. If it does, the agreement may say what happens when the condition is not met.

Representations and the seller’s disclosures

BDC describes representations and warranties as the place where the vendor formally describes the condition of the business and discloses known issues. In its section on indemnification, it also says the seller is not liable for misrepresentations forever and that liability is typically capped at a certain percentage of the purchase price. Compare the new information with those statements and with any disclosure the seller gave. Note whether the agreement requires the seller to update its disclosure before closing.

Price adjustments

BDC notes that purchase price adjustments can apply for the condition of the business on takeover day, and names working capital at closing as one important example. If the new information is financial, check whether an adjustment already covers it.

What to do now

Write to the seller promptly, describe what you found and ask for an explanation and supporting documents. Do not skip closing or sign a waiver until your lawyer has read the termination, notice and remedy clauses. If your lender is financing the purchase, ask whether the new facts must be reported to it.