Split signing and closing (gap period)

In a split signing and closing, the buyer and seller sign the purchase agreement first and complete the sale afterwards. BDC notes that in most acquisitions there is a period between signing the purchase agreement and the closing, which it describes as the date the buyer takes possession of the business. That period is the gap.

Why a gap exists

BDC says third-party consents to transfer leases or contracts, and regulatory approvals such as Competition Law approvals, may need to be obtained before closing. The Competition Act also says a transaction that must be notified shall not be completed before the end of the waiting period in section 123, subject to that section’s exceptions. The Competition Bureau says the parties are prohibited from completing a merger during the initial waiting period unless they receive a waiver from the Bureau to proceed. Each outstanding item is a closing condition.

What to ask about the gap

• Who runs the business between signing and closing, and what the seller may not do without the buyer’s consent
• The outside date by which the conditions must be satisfied, and what each side may do if it passes
• Whether each condition can be waived, and by whom
• Which approvals apply to this deal and how long each takes

For what follows an accepted offer, see what happens after my offer is accepted.