The Closing usually follows closely on the heels of Due Diligence. Closings have changed over the years, most often they are now conducted in the law offices of the two attorneys’. Before the actual day of closing, it is important to review your check list (we can provide one, if needed) to make sure what final items must be completed or removed from the premises. Hopefully the following will be of assistance.
Schedules: Virtually every contract has schedules that need to be prepared and attached at closing, if not before. These schedules will include such items as: List of assets included in the transaction (and sometimes, those assets not included); List of customers (names, addresses, contacts, phone numbers, etc.); List of Suppliers (same as customers); All formulae; List of Trademarks; Release of Liens; Transfer of Lease Agreements (Copiers, etc); Final Inventory list; Accounts Receivable Aging (If included); Accounts Payable Aging (If being assumed); and The closing financial statements.
Debt: Bank debt in most cases cannot be assumed by the buyer. The bank will require payment before they release any liens. This takes place at closing. Bank debt is a serious issue, because if the bank debt is of significant size, there may not be enough cash at closing to cover this debt. When this occurs, the seller must dip into their personal assets to cover the remaining bank debt.
Company Cash & Bank Accounts: Cash is usually not included in the transaction, so it needs to be transferred to another account, signature cards changed, etc. Frequently, the acquiring company will establish a new company to make the acquisition. This occurs even when they acquire the company name and brands.
Contract and Note Payable: By this time both have been reviewed by the respective attorney’s and should be fine. However, it never hurts to read them again to make sure everything is correct.
Bank Information: The bank should be notified well in advance of the transaction closing date, so they can provide you with the closing amounts of all bank debt and prepare the release of Liens that will be included in the schedules. In addition, you should provide the buyer with the: Banks Name; Address, Branch Managers Name; Bank routing number and other information (get from Branch Manager), to help facilitate the wire transfer at closing. Have the Branch Manager call you when the wire arrives.
Closing Day: At the scheduled time meet in your attorney’s office — the buyer will be in their attorney’s office. Review the contract and schedules and provide any last minute information that is necessary. The attorney’s will already have reviewed the legal papers although sometimes some last minute wording changes are necessary. At the right time they will ask that you sign on the appropriate line on the signature page. The buyer will do this also and the attorneys with fax or email the signed pages to each other, to be held by them until the wire transfer arrives. The following day they will overnight the signed originals to each other to be affixed to the contract.
Download this article as a PDF: POV_23 A Smooth Closing