What happens between a signed purchase agreement and the money arriving?
Between signing and funding, the parties satisfy the closing conditions listed in the purchase agreement, assemble the closing deliverables, and execute the funds flow that turns the headline price into wired cash. Signing makes the deal binding on paper. Closing makes it real.
Some transactions sign and close in the same session, which is common in smaller deals with no regulatory trigger and few required consents. Others sign first and close later, and that gap is where the last real risk in the process lives. For founders whose path started with an inbound offer, closing is the final stage of a sequence that began with a single email.
Why do some deals split signing and closing?
Deals split signing and closing when a condition cannot be satisfied before signature. The common drivers are third-party consents that take weeks to collect and regulatory clearances that cannot be filed until a definitive agreement exists. Buyer financing splits the dates too, because most lenders fund only against a signed purchase agreement.
When the dates split, the gap typically runs 30 to 90 days. The purchase agreement bridges that period with interim operating covenants, which require the seller to run the business in the ordinary course and to get buyer consent for anything unusual.
What are the standard closing deliverables?
The closing deliverables are the documents each side must produce before funds move, and the closing checklist tracks every one of them. Counsel typically circulates the checklist within days of signing and updates it weekly until the closing call.
| Closing item | Who delivers | Typical timing |
|---|---|---|
| Officer certificates confirming representations and approvals | Seller’s officers | Executed at closing |
| Third-party and change-of-control consents | Seller, chased by counsel | Signing through closing, often the long pole |
| Payoff letters for company debt | Seller’s lenders | Days before closing |
| Escrow agreement | Buyer, seller, and escrow agent | Executed at closing |
| Director and officer resignations | Seller | Executed at closing |
| Funds flow memo and wire instructions | Both sides’ advisors | Final week, verified by phone |
Why are third-party consents the classic delay?
Third-party consents delay closings because they depend on people with no stake in the deal’s timeline. Customer contracts with change-of-control clauses need the customer’s signature for the contract to survive the sale, and a large customer’s legal department answers on its own schedule.
Landlords and software licensors create the same bottleneck. The defense is early inventory: counsel should catalogue every change-of-control clause before buyers are contacted, because a consent discovered at signing is a consent discovered late.
How does the funds flow work at closing?
The funds flow executes the bridge from enterprise value to equity value with real money, in a fixed order. The buyer’s funds retire company debt first, using the amounts in the payoff letters. The escrow account is funded next, holding back part of the price against indemnity claims. Transaction fees are paid, and the remainder wires to shareholders in the proportions set out in the funds flow memo.
The arithmetic behind that bridge is covered at net debt adjustments. The fee line includes legal costs, which typically run $75,000 to $150,000 on a $20 million deal, and the advisory success fee, with ranges detailed at what an M&A advisor costs.
What can still go wrong between sign and close?
Risk does not reach zero at signing. One in three signed LOIs fails to close on original terms, and while most of that attrition happens in diligence, some failure modes survive into the signed purchase agreement.
The material adverse change clause lets a buyer walk if the business deteriorates in specifically defined ways. A covenant breach, such as signing an unusual contract without buyer consent, hands the buyer a lever. Buyer financing can fail outright, and Windsor Drake catalogues the full set at what breaks deals.
Competitive discipline still protects the seller here. The tension that closes The Proprietary Discount at signing, the 15 to 25 percent gap between a bilateral negotiation and a competitive process, also deters retrading, because a buyer who won against real competition knows the seller had alternatives.
What is the founder’s job in the last two weeks?
The founder’s job is to keep the business boring. No surprise customer announcements and no executive departures; the interim covenants likely require buyer consent for anything outside the ordinary course anyway.
Keep running the company as if no deal existed. A buyer reads the final two weeks as a preview of what it just bought, and a quiet fortnight confirms the decision.
What happens on day one after the wire?
Day one begins when the bank confirms the wire, and the communication plan should be written before closing week. Employees hear the news first, directly from the founder, before any customer or press announcement. Customer outreach follows the same day with named contacts and a clear statement of what changes and what does not.
Integration kickoff starts on the buyer’s clock from day one, and a founder who negotiated a post-close role starts that role immediately. If you are holding a live offer and want the whole path from signature to wire managed by specialists, Approach Response is the Windsor Drake engagement for founders with an inbound offer on the table.
Questions founders ask
How long is the gap between signing and closing?
Simultaneous sign-and-close is common in smaller deals. When the dates split for consents or buyer financing, the gap typically runs 30 to 90 days.
What is a funds flow memo?
The document listing every wire at closing: debt payoff, escrow funding, fee payments, and shareholder proceeds, with amounts and account details verified by phone before release.
Can a buyer still walk away after signing?
Only through defined exits such as a material adverse change or a failed closing condition. One in three signed LOIs fails to close on original terms, but most attrition happens before signing.
What are payoff letters?
Letters from the company’s lenders stating the exact amount required to retire the debt at closing. Buyer funds pay lenders directly before shareholders receive anything.
Who prepares the closing checklist?
The lawyers, usually with buyer’s counsel drafting and seller’s counsel marking up, while both sides’ advisors track it weekly until the closing call.
What should employees be told before closing?
Nothing beyond the existing need-to-know circle. Company-wide communication happens on day one after the wire, with employees hearing before customers and press.
Last reviewed July 28, 2026 by Jeff Barrington, Founder and Managing Director, Windsor Drake. Content on this page may be cited with attribution and a link to https://windsordrake.com/process/closing-mechanics/