Escrow and Closing Information
When acquiring a company and engaging in an M&A deal, complexities may arise based on sophisticated deals.
Buying a business can be different than any other transaction you have ever done in your life.
A home or property might be the closest thing to it, but it could be the furthest thing from it as well based on how complex the closing details are.
In general, after an LOI is accepted, the Seller will ‘open the books’ so to speak. This is generally referred to as the due diligence period. The Seller, if they want to sell, will disclose as much information as the buyer requests in order to go through with the deal.
If a deposit is placed, sometimes that is sent to the buyer, other times to the broker or attorney’s office, or held in escrow with a third party or title company.
Both parties will agree upon a closing date. This is the target date for which the buyer will prepare properly and send the remaining monies due to transact.
Wiring details should be prepared in advance. Same-day wire transfers can be done, but you can also send it a few days earlier if you want the money sitting in escrow or at the title company’s office if you know the money is safe. Call your bank in advance to make sure there are no daily limits on your account so you do not run into hiccups or send money in piecemeal and potentially lose a deal. If another method than wire is preferred, find out how you can ensure the money is received on the date of closing.
For many deals, a title company is selected by the Buyer or Seller that will oversee the closing and see the deal through, making sure both parties met their obligations. They will independently review the contract and agreement and see what each party must do.
When closing ensues, you want to ensure there is a good handoff. Sometimes the handoff might take days, weeks, or several months. The important details to work out are what are the prompts for the title company to release the money.
For many deals that is just a matter of some usernames and passwords. For other deals, it is handing keys over to property, shipping inventory, and ensuring a smooth transition of staffing protocols.
The more complex, the more legal heads typically involved, and the more that needs to happen for the money to be released. You can also modify the deal so that monies are received in parts as assets are released.
Title companies can complicate deals so you need to be sure you select a good one and you want to have a good legal team backing you up on a complex deal.
Since the title company may review the contract and interpret what obligations need to be met, if there’s any ambiguity or if something is released that shouldn’t have been or not released that should have been then this could cause a massive problem. You want to stay on top of everything but you don’t want to put undue pressure or burden on the other party that is unwarranted out of fear of breaking rapport or even losing a deal.
You want to ensure a smooth transaction and make sure everyone’s on the same page going in to the transaction.
We wish you luck during your next M&A transaction.
If you would like to hop on a call with us to go over things related to acquisitions and general business overview, please schedule a time here. We do a one hour deep dive where we go over your needs as it relates to acquisitions & business expansion, and then we go on the hunt for you to line up a business that fits.
Contact Us for to help with your next M&A deal or acquisition:
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Leader in Acquisitions with Expertise in Representing Sellers & Buyers on Deals
Jarbly is a leader in acquisitions with expertise in helping with listings, negotiations, LOI's, asset purchases, company purchases, and real estate purchases. JARBLY has access to high net worth individuals if you are on the sell-side and businesses that may be of interest to you if you are on the buy-side.