How Firm Are Closing Dates?
When you buy or sell a small business, your letter of intent and purchase agreement will typically establish a closing date - a specific date on which the purchase price will be paid and ownership of the business will be transferred. You should expect, however, that the closing date will change. In most instances, the purchase or sale will close later then first expected.
Scheduling a closing involves coordinating the calendars and efforts of many people. Closing dates are often extended because the buyer and seller need more time to complete all the tasks necessary to close, such as drafting, reviewing, and negotiating the purchase agreement and closing documents, drafting disclosure schedules, obtaining financing, obtaining permits and licenses, and obtaining consents from landlords and other contracting parties to transfer a lease or contract. Opposing attorneys, lenders, landlords, and other parties outside of the control of the buyer or seller can slow down the timing of closing because they have other demands on their time or might not prioritize your closing as high as you do. Even your attorney might need more time because they are probably working on multiple transactions at one time.
A closing date in a contract is a goal to work toward, but you should anticipate that it will likely be extended to a later date. And it might even be extended multiple times. In my experience, it is common for us to work toward an agreed-upon closing date, but as that date gets closer, we get a better idea of how much time we will need to complete outstanding tasks in preparation for closing and how much more time we might need. The closing date might be extended for several days or a week (or more) to provide enough time to complete those tasks. Then, as the new closing date approaches, we reassess whether the closing date needs to be extended again to accommodate the completion of the remaining outstanding tasks. This continues until everyone is in agreement that all tasks have been completed or can be completed by the new closing date.
Closing the purchase or sale of a small business is a complex transaction with many moving parts and tasks that must be completed in order to close. The reality is that we rarely close on the closing date first specified in the letter of intent or purchase agreement, so buyers and sellers should set their expectations accordingly.