What Does Closing Date Mean?
The closing date refers to the date when a company purchase and sale transaction is signed off and completed. This date may be different than the effective date, which is the date when the transaction is deemed to have occurred. Most of the time, the closing and effective date of a transaction is the same day. However, they may differ if the buyer has already earmarked a certain date to close and the transaction close is slightly delayed. If the delay extends beyond a few days, the seller should request compensation to make up for not having received the closing consideration on the earmarked effective date.
Divestopedia Explains Closing Date
There are many milestone dates during the M&A process, which can be confusing for an unsophisticated seller. In most cases, however, the closing date is the key milestone when the sale is consummated and the seller actually receives the agreed upon consideration (i.e. cash, seller note, consideration shares, etc.).
Some of the milestone dates in a sale process that a seller needs to be aware of include:
- When the letter of intent (LOI) is signed;
- When the due diligence data room is required to be ready;
- When asset appraisals are completed;
- Removal of conditions precedent;
- Removal of financing conditions;
- Buyer board approval; and, finally,
- The closing date - when the deal is executed.