Signing to Closing: Rapid Fire

The whole unit on one sheet: the gap window, disclosure documents, closing conditions, the MAC bar, deal protection, and communications.

Which One-Liners Win Points?

• Signing is NOT closing. The definitive agreement binds the parties to close subject to conditions; the deal consummates only when conditions are satisfied (or waived), for BOTH buy-side and sell-side bankers. The banker assists but does NOT sign the proxy or 8-K, clear regulators (counsel does), or distribute press releases (investor relations does).
• All-cash = Schedule 14A proxy only; stock-for-stock = joint proxy statement and prospectus on Form S-4: ONE document, TWO regulatory hats. The 20% rule (NYSE/Nasdaq) is CONDITIONAL: 20%+ new-share issuance can trigger an acquirer vote and second meeting in the joint proxy.
• Bring-down is SEPARATE from no-MAC: bring-down asks if signing-date reps are still true at closing; no-MAC asks if the target suffered a Material Adverse Effect since signing. MAC protects the BUYER only; the target relies on specific performance to force closing.
• Break fee is target-pays; reverse termination fee is buyer-pays, NOT symmetric.

Which Numbers Matter Most?

Which Gotchas Trip Students Up?

• HSR is 30 days for mergers, 15 for cash tender offers; trap answers swap the numbers. CFIUS is national-security review, not antitrust; it runs parallel to HSR for foreign acquirers and can block a deal even when antitrust clears it. The 10-day preliminary-filing rule is not a guaranteed SEC timetable; comment cycles drive most delay.
• MAC requires materiality AND durational significance in years, not quarters; a bad quarter does not trigger a walk-away. The banker signs a written consent for the fairness opinion, NOT the proxy. Press releases are FURNISHED, not FILED, changing liability but NOT the 4-business-day 8-K deadline. Bankers monitor; counsel clears (trap: banker files HSR).
• Financing is a closing condition only if expressly stated; most strategic mergers are NOT financing-conditioned (common in PE/LBO deals).

How Do the Gap Period, Closing, MAC, and Communications Work?

• The definitive agreement already contains price, consideration form, R&W, covenants, closing conditions, termination rights, and deal-protection provisions; both boards approved before signing. Six workstreams: announcement, disclosure, regulatory clearances, shareholder approval, bring-down, closing mechanics.
• Joint proxy contents: deal terms, merger background, board recommendations, fairness-opinion summary, risk factors, financials; the banker drafts these but does NOT certify financials (auditors do).
• Closing conditions (CPs) must be satisfied or waived before either party must close; failure gives a walk-away right. Categories: regulatory/shareholder approvals, no injunction, bring-down of R&W, no-MAC, covenant compliance, consents, solvency, financing (if conditioned), certificates, legal opinions.
• Bring-down = reps remain accurate at CLOSING, not just signing; general reps use "accurate in all material respects," fundamental reps (organization, authority, capitalization, brokers' fees) use "accurate in all respects." Sub-tracks: HSR (DOJ/FTC, extendable via "Second Request"), foreign antitrust, CFIUS; the closing checklist tracks every condition, owner, date, status.
• A MAC (also MAE) lets the BUYER walk if the target deteriorates materially before closing; most-negotiated, least-invoked provision. Broad trigger plus carve-outs (economic/industry conditions, law changes, war/pandemics/disasters, the deal itself, missed projections), most with a disproportionate-impact override to the seller.
• Akorn v. Fresenius is the landmark Delaware Chancery decision finding a true MAE; the buyer bears the burden of proof. Sandbagging is state-specific and contract-driven; Delaware generally defaults pro-sandbagging (unsettled). The target's remedy is specific performance.
• No-shop: the target may NOT solicit proposals or share non-public information, must terminate existing talks. Fiduciary out: the board may RESPOND to an unsolicited Superior Proposal but must give the buyer notice and a matching period first.
• Break/reverse fees are asymmetric: the target fee covers the buyer's sunk costs; the larger buyer fee compensates for a lost deal. Target-fee triggers: Superior Proposal, recommendation change; buyer-fee triggers: financing failure (PE/LBO), regulatory denial, breach.
• Day-of-signing package: press release, investor presentation, investor call. Form 8-K covers Item 1.01, 7.01 (Regulation FD), 9.01 (exhibits); attaches as Exhibit 2.1, press release/deck as Exhibit 99.
• The banker develops materials and preps the chief executive officer (CEO) and chief financial officer (CFO) for the call but does NOT issue any of it. Regulation FD: pre-announcement, an NDA fits the exception; post-announcement, follow-up goes through public channels.

One-Breath Recap

Signing is not closing: the definitive agreement binds the parties to close subject to conditions, and the gap period runs disclosure, regulatory clearance, and communications for both bankers. Cash deals file a Schedule 14A proxy; stock deals add a joint proxy and prospectus on Form S-4, and a large issuance triggers a second vote. Closing conditions must hold, bring-down distinct from no-MAC. Deal protection locks the parties in through the no-shop, a fiduciary out, a target break fee, and a larger buyer reverse fee. The 8-K is due within 4 business days while the furnished press release and deck ride as exhibits, and the banker develops all of it but signs and distributes none.

Need more than the recap? Read the full Signing to Closing unit.