Toward the end of a sale process, the parties will decide whether the purchase agreement will be structured as a ‘Deferred Closing’ or a ‘Simultaneous Sign-and-Close’.
In our 22 years of advising sellers of middle-market aerospace and defense companies, roughly half of our clients have utilized Deferred Closings. In a Deferred Closing, change of ownership will take place after certain conditions precedent are completed or waived. We’ve seen Deferred Closings utilized for numerous reasons, most of which relate to conditions that are best accomplished post-signing. A straight-forward example is when a government approval is required after the signing of an agreement, such as a Hart-Scott-Rodino filing.
When a Deferred Closing isn’t required, the parties may opt to utilize a simplified form of agreement, whereby the transfer of ownership takes place simultaneously with the signing of the agreement. In these ‘Simultaneous Sign-and-Close’ transactions, the parties are able to complete all conditions precedent prior to signing and therefore the transfer of ownership can be effectuated on the signing date. Roughly half of our clients have sold their businesses through Simultaneous Sign-and-Close transactions.
As with most aspects relating to selling a middle market aerospace and defense company, proper planning will enable you to decide, well in advance, which structure of sale is best for you.
Have a great day everyone.