That gap is where deals die, though not for the reason most founders assume. Axial's 2025 Dead Deal Report shows financing-related broken LOIs falling from 21.3% in 2023 to 10.7% in 2025, while diligence findings rose to 25.3% and quality-of-earnings discrepancies to 21.3%. The money is available. What fails is confidence in the numbers, and the interim period is when that confidence is either confirmed or lost.
This guide breaks down sign-and-close versus sign-then-close structures, what actually happens during the interim period, the documents required to close, and how to avoid the last-minute surprises that derail otherwise solid transactions. Middle-market deals ($10M-$100M in revenue) typically involve more moving parts than smaller transactions, which is exactly why experienced advisory guidance matters here.
Key Takeaways
- Signing and closing can occur the same day or weeks to months apart, depending on deal structure
- Use the interim period to clear financing, consents, and regulatory approvals before closing
- Plan for a closing package with dozens of documents beyond the purchase agreement
- Preserving "business as usual" operations and buyer trust during the interim window is critical
- Experienced M&A advisory guidance reduces the risk of surprises derailing your closing
What Happens Between Signing and Closing
Signing a definitive purchase agreement creates a binding commitment. It doesn't transfer ownership. That happens at closing, once specific closing conditions are satisfied or waived.
According to the ABA's 2025 Private Target Deal Points Study of 139 private-target agreements, roughly 70% used a deferred closing structure rather than signing and closing on the same day. That majority reflects how often outstanding items remain after signing.
Common items resolved during this window:
- Regulatory approvals: including HSR Act clearance, where applicable
- Buyer financing: finalizing debt commitments or equity funding
- Third-party consents: landlord approvals, contract assignments, change-of-control clearances
- Due diligence completion: closing out any remaining confirmatory work, which typically runs 60 to 90 days from the LOI and tests financial performance, customer relationships, legal structure, operational capabilities, management depth and market position
Pre-Closing Covenants Protect the Business
Purchase agreements typically include covenants restricting the seller from making material changes during this window. Sellers generally can't:
- Take on new debt outside the ordinary course
- Make major personnel changes
- Materially alter inventory levels or pricing
- Enter new material contracts without buyer consent
These covenants exist to make sure the business the buyer closes on matches the business they agreed to buy at signing.
Material Adverse Change (MAC) clauses protect buyers further. As Cleary Gottlieb explains, a MAC/MAE provision can give a buyer a walk-away or renegotiation right if the business suffers a significant, lasting deterioration before closing. Most agreements include a no-MAC closing condition for that reason.
There's no universal benchmark for how long this period lasts. Deal complexity, financing structure, and regulatory requirements drive the timeline, which typically runs from a few weeks to several months.
Why the Interim Period Matters for Founders
Here's the part founders often underestimate: you're still running the business. Every decision you make during this window, whether a hiring change, a discount to a key customer or a delayed shipment, can trigger a covenant breach or feed a MAC argument. Mismanagement here doesn't just risk a bad outcome. It can kill the deal outright.
Sign-and-Close vs. Sign-Then-Close: Choosing the Right Structure
Not every deal follows the same timing. Two structures dominate middle-market M&A, and the choice affects how risk gets allocated between buyer and seller.
| Structure | What Happens | Risk Allocation |
|---|---|---|
| Sign-and-close | Signing and closing occur simultaneously | Risk locks in at signing; no interim exposure |
| Sign-then-close | Signing creates a binding deal; closing follows once conditions are met | Risk is negotiated through covenants, MAC clauses, and termination rights |
Sign-and-close eliminates the interim risk period entirely. Morgan Lewis notes that parties generally prefer this structure where feasible, since it gives sellers certainty and removes the exposure created by a waiting period. The catch: financing, consents, and approvals all have to be locked in before anyone signs.
Sign-then-close is the more common structure in middle-market deals, particularly those involving private equity or institutional buyers. Financing commitments, regulatory review, and third-party consents frequently remain outstanding at signing, forcing a two-stage process.
Where the Hart-Scott-Rodino Act applies, parties can't even close until the statutory waiting period, typically 30 days, expires.
This structure demands more negotiation upfront:
- Termination rights if conditions aren't met by a certain date
- MAC (material adverse change) provisions defining what qualifies as a deal-breaking change
- A "long-stop date" after which either party can walk away
Choosing the right structure, and negotiating the conditions inside it, is one of the areas where Exit Boston's advisory team works closely with founders. Structuring a deal timeline that protects a seller's interests, regardless of which path the buyer prefers, is part of what separates a smooth close from a stressful one.
The Closing Checklist: Documents and Deliverables
Closing day involves far more paperwork than the purchase agreement alone. Practical Law's U.S. closing checklist identifies a core set of documents required before funds and ownership actually change hands.
Core closing documents:
- The final purchase agreement and exhibits
- Disclosure schedules (updated as of closing)
- Bill of sale or stock transfer documents
- Assignment of contracts and intellectual property
- Corporate resolutions and third-party consents
Ancillary agreements commonly required:
- Transition services agreements
- Employment or consulting agreements for key personnel
- Non-compete and non-solicitation agreements
- Escrow agreements
Escrow, in particular, is standard practice. SRS Acquiom reports escrow arrangements in 91% of private-target deals, with a median escrow of 10% of transaction value without representation-and-warranty insurance, dropping to just 0.5% when RWI is in place.
That last figure is the one to negotiate against. In Exit Boston's observed middle-market activity, representation and warranty insurance is now close to standard above roughly $15 million of enterprise value, which means a seller in that range should be treating a 10% holdback as a negotiating position rather than a market norm.
The closing statement ties the economics together. It typically covers:
- Purchase price allocation and final adjustments
- Debits, credits, and payoff amounts
- The seller's net proceeds after all closing calculations
Pre-Closing Tasks for Buyers and Sellers
Those documents only matter if both sides finish their pre-closing work first:
Buyer tasks:
- Form the acquiring entity and obtain its EIN
- Secure necessary licenses or permits
- Finalize financing documentation
- Confirm wire instructions and funds-flow mechanics
- Complete any required bring-down due diligence
Seller tasks:
- Confirm the entity is in good standing
- Obtain tax clearance certificates
- Pay off outstanding liens against the business
- Collect third-party consents still outstanding at signing
- Deliver payoff letters and key employment or consulting agreements
The Closing Meeting and Execution Process
Forget the movie image of everyone gathered around a conference table signing papers. Most closings today happen virtually, through document exchange and escrow release, rather than in-person signings. The ABA found that publicly available M&A agreements permitting remote closings jumped from 200 in 2019 to 506 in 2021, a clear signal of where practice has moved.
A typical closing call unfolds like this:
- Legal counsel confirms all conditions have been satisfied or formally waived.
- Signature pages are released from escrow once confirmation is complete.
- Purchase price is wired to the seller.
- Ownership documents are recorded or delivered to complete the transfer.
Even a clean closing sequence can slip. Dates get pushed back for predictable reasons:
- Outstanding regulatory approval
- Financing commitment that has not finalized
- Third-party consent still in negotiation
- Covenant breaches or new information affecting representations
Goodwin's 2025 analysis of deal delays points to these same factors as the most common causes of last-minute slippage.
Avoiding Common Pitfalls Between Signing and Closing
The interim period is where good deals go sideways. A few practices consistently separate smooth closings from chaotic ones.
- Keep the interim period as short as possible. Every extra week is another chance for something to go wrong: a financing hiccup, a customer loss, or a swing in the target's financials.
- Don't hand over operations early. Training the buyer's team or sharing operational control before closing, without legal guidance, can create gun-jumping issues and blur liability before ownership transfers.
- Communicate openly with the buyer. Trust erodes fast when a buyer senses silence or hidden problems; regular performance updates during the interim protect the relationship.
That third point is worth more than it sounds. Most broken deals do not collapse in a single dramatic moment. Calls slow down, the weekly check-in gets shorter, nobody declares it dead, and what actually eroded was trust. Diligence is long and adversarial by design, and personal chemistry with the buyer is not a luxury in that window. It is a closing mechanism.
This is where Exit Boston plays a hands-on role: running dry-run closings and coordinating with legal and financial advisors to surface issues before the actual closing day, rather than during it.
What Happens After Closing
Closing isn't the finish line. Most deals include a post-closing escrow holdback, released after a survival period, often 12 to 18 months, during which buyers can still bring claims on the representations and warranties.
Disputes can still surface after the wire transfers:
- Financial disputes: working capital adjustments, purchase price true-ups
- Operational disputes: transition service shortfalls, unmet performance milestones
- Legal disputes: indemnification claims tied to undisclosed liabilities
SRS Acquiom's claims data shows at least one post-closing indemnification claim occurred in 30% of deals reviewed. Founders should expect the buyer relationship, and the paperwork trail, to continue well past the closing payment.
Frequently Asked Questions
What happens between signing and closing?
Parties use this interim period to satisfy closing conditions like financing, third-party consents, and regulatory approvals. Ownership doesn't officially transfer until these conditions are met and closing occurs.
How long does it take to close on a house after signing the purchase agreement?
In M&A, the interim period typically ranges from a few weeks to several months, depending on deal complexity and outstanding conditions. Real estate purchase agreements follow a different closing timeline.
What does closing a transaction mean?
Closing is the point when legal ownership and payment officially transfer between parties. It completes the binding commitment made at signing.
What is the difference between sign-and-close and sign-then-close?
Sign-and-close means signing and closing happen simultaneously, eliminating interim risk. Sign-then-close separates the two events, requiring negotiated conditions and termination rights to manage the gap.
What documents are needed at an M&A closing?
Core documents include the purchase agreement, disclosure schedules, bill of sale, and contract assignments. Ancillary agreements like escrow arrangements and employment agreements are typically required as well.
Can a buyer back out after signing but before closing?
It depends on the closing conditions and termination rights negotiated in the purchase agreement. A buyer generally can't walk away without a valid unsatisfied condition or a qualifying Material Adverse Change (MAC) event.
Why do most deals fail between LOI and closing?
Not financing. Axial's 2025 data puts financing failures at 10.7% of broken LOIs, down from 21.3%, while diligence findings reached 25.3% and quality-of-earnings discrepancies 21.3%.
