Closing Conditions

What Are Closing Conditions?

Closing conditions — also called conditions precedent (CPs) — are the requirements specified in a sale and purchase agreement that must be fulfilled before the transaction can proceed to completion (Corporate Finance Institute). If a condition is not satisfied or waived by the specified deadline (the “long-stop date”), either party may have the right to terminate the agreement without completing the deal.

Closing conditions protect both buyer and seller by ensuring that the fundamental assumptions underpinning the deal remain valid between signing and closing.

Common Closing Conditions

Regulatory Approvals

• Antitrust clearance — competition authorities must approve the transaction or confirm that no filing is required
• Foreign investment approval — cross-border deals may require approval from bodies such as FIRB (Australia), CFIUS (United States), or equivalent regulators
• Industry-specific licences — transactions in regulated sectors (banking, insurance, healthcare, telecommunications) may require approval from sector regulators

Financial Conditions

• Financing condition — the buyer’s obligation to close is contingent on securing committed financing (less common in private equity deals, where buyers typically provide financing certainty)
• No material adverse change — the target business has not experienced a material adverse change since signing
• Minimum cash or working capital — the target must maintain a specified level of cash or working capital at closing

Compliance Conditions

• Accuracy of representations and warranties — the seller’s representations must remain true and accurate as of the closing date
• Performance of covenants — both parties must have complied with their pre-closing obligations (e.g., operating the business in the ordinary course)
• No legal impediment — no court order, injunction, or legal proceeding prevents the transaction from closing

Third-Party Consents

• Key customer or supplier consents
• Landlord consent to assignment of leases
• Change of control consents under material contracts
• Employee or union consultations where required by law

The Gap Between Signing and Closing

The period between signing the SPA and satisfying all closing conditions can range from simultaneous (sign-and-close) to several months:

Condition Type	Typical Timeline
Simultaneous close	Same day
Standard regulatory	4–8 weeks
Complex antitrust review	3–6 months
Foreign investment review	2–6 months
Multiple jurisdictions	6–12 months

During this gap, the seller typically operates the business under “ordinary course” covenants, restricting major decisions without the buyer’s consent.

What Happens If Conditions Are Not Met

• Extension — the parties may agree to extend the long-stop date to allow more time
• Waiver — the party benefiting from the condition may choose to waive it and proceed
• Termination — either party exercises its right to terminate, potentially triggering a break-up fee
• Renegotiation — the parties may renegotiate deal terms in light of the unmet condition

Closing Conditions in Asia Pacific

Closing condition timelines in Asia Pacific transactions can be significantly longer than in Western markets due to the complexity of multi-jurisdictional regulatory approvals. Cross-border deals involving China, India, or Indonesia often require approvals from multiple government agencies with unpredictable timelines. In Australia, FIRB review is a standard closing condition for foreign acquisitions above monetary thresholds, and the review period was extended in recent years for sensitive sectors. In Japan, the Japan Fair Trade Commission’s merger review process and the Foreign Exchange and Foreign Trade Act screening add layers of regulatory complexity. AI-native platforms like Amafi help advisors map closing condition requirements across Asia Pacific jurisdictions, reducing the risk of regulatory surprises that can delay or derail transactions.