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Part of Between signing and completion: the closing and integration details sellers miss
Closing and integration checklist: consents and handover
A closing and integration checklist: which consents third parties must give, who usually pays each step, the day-one handover items and why a delay costs most.
Closing and integration involve four groups of work, each with its own bill or cash call. First, what lawyers and accountants charge to complete. Second, the consents third parties must give before the deal can complete. Third, what the switchover consumes. Fourth, what a delay costs when one consent runs late. This page sets out what sits in each group, who normally pays, and which parts you can fix in advance. It is a checklist rather than a price list: each fee is quoted by the adviser or third party for your deal, so the useful work is knowing which items exist, who signs them off and when to ask.
What to take away
- Ask who pays for each item before it is incurred. Several of these are conventionally split, which means they are negotiable.
- The largest cost at this stage is usually not a fee. It is a delay, or a business that traded badly through the handover.
- Your accountant models the tax consequences of the structure and your lawyer scopes the drafting; both belong before the price is agreed rather than after.
Completing the transaction
| Cost | Who usually pays | What drives it | How to bound it |
|---|---|---|---|
| Legal drafting and negotiation | Each side its own | The number of consents, the warranty negotiation, disputes | Scope in writing; settle the structure early so drafting is not repeated |
| Completion accounts | Each side its own accountant | How the working capital definition is written | Attach an illustrative calculation to the agreement |
| Escrow agent | Split, by agreement | Whether a third party holds the money and for how long | Agree the mechanism when the holdback is agreed |
| Lender fees | Buyer | The facility, and whether it completes | Ask which fees are payable if the deal does not complete |
| Registration and filing | Buyer, usually | The structure and what must be filed or released | Your lawyer lists these against the structure |
On the release side, the usual item is the security a lender being repaid has registered over the business or its assets. In the United States that registration is a UCC financing statement, and it comes off the record through an amendment filed with the state filing office; in California, for example, the Secretary of State takes the national Form UCC3 for a termination. Its UCC forms and fees page lists the amendment filing, for each purpose such as termination, continuation, assignment or amendment, at $10.00 for two pages or less and $20.00 for three pages or more. Ask early who files it and when it will be on the record, because a buyer's own lender will want to see it gone.
The closing documents and approvals
A consent list is half the closing file. The other half is the documents the deal cannot complete without, and it is short enough to check off:
- Board and shareholder resolutionsthe seller's approving the sale and the buyer's approving the purchase.
- Stock certificates and transfer instruments for a share purchase; a bill of sale and assignment instruments for an asset purchase.
- Resignations from the seller's directors and officers, and appointments of the buyer's replacements.
- An officer's certificate and a secretary's certificate confirming the resolutions and who may sign.
- A certificate of good standing for the seller, from the Secretary of State in the state where it is organised.
- Lien searchesUCC, tax and judgment — run against the seller and its assets close to completion.
- Payoff letters from each lender and finance company being repaid, with the release of its security.
- The assignment or novation of the contracts that need it, and the notices to customers and suppliers that go with them.
Build the list from the structure as soon as it is fixed and give every item an owner and a date. Let the searches and payoff letters run first, because a lender on the other side reads them before it releases anything.
Consents third parties must give
This group surprises people because none of it is a professional fee and none of it is optional.
Third-Party Consent Charges
- Landlordlicense to assign, legal costs covered
- Franchisortransfer fee
- Licensing bodynew application fee
- Lendercharge to release security
- Equipment financesettled early on original terms
A seller who has prepared knows which consents are needed. A landlord may charge for considering and granting a license to assign. The lease depends on the mechanism of assignment. The landlord often wants legal costs covered whatever the outcome.
Landlord consent sits on the closing and integration requirements list, with the party who must obtain it.
A franchisor may charge a transfer fee. A licensing body may charge for a new application where a license cannot be transferred. A lender being repaid may charge to release security. Equipment finance may have to be settled early, on terms set when it was taken out.
Put together, the usual consent list is short:
- The landlord, for a licence to assign the lease or for consent to a change of control.
- The franchisor, where the business is a franchise.
- The licensing body, where a licence cannot pass to a new owner.
- The lender being repaid, for the release of its security.
- Any equipment finance company, for early settlement or a transfer of the agreement.
- Customers and suppliers whose contracts have assignment or change-of-control clauses.
Every one of these belongs on a list your lawyer builds early, with the amount confirmed by asking the third party rather than estimated. A consent that costs money and takes time is a different planning problem from one that is free and slow. You want to know which you have before the completion date is fixed.
The switchover
The practical transfer consumes real money and rarely appears in anyone's budget.
Switchover Cash Costs
- New insurance from completion, possibly worse terms
- Payment facilitiesapplications, holding period
- Supplier accounts reopened, prepayment terms
- Stock and consumables before first receipts
- Payroll and systems migration, dual running
- Signage, stationery, name changes
The pattern: the business needs cash on day one for reasons unrelated to price. The usual items are these:
- Payroll for the first pay run under the new owner, which may fall days after completion.
- Bank mandates and payment accounts, which have to be opened or changed before money can move.
- Insurance cover in the new owner's name from the completion date, not from renewal.
- Utilities, software licences and subscriptions that need transferring or re-contracting.
- Supplier terms, which can reset to payment on order until the new owner has a trading history.
Each one is a list item for the completion plan, with a named person and a date. The working capital position and what the business needs to trade are settled in the deal, not discovered afterwards.
The closing and handover page explains the mechanism, and the funding belongs in the plan on the acquisition financing page.
Integration, which is a cost with a decision attached
Everything above is unavoidable. Integration spending is not, and buyers routinely start it in month one when the business is least able to absorb it.
Integration Spend Decision
Does the business need it to keep operating?
cost of buying, unavoidable
your improvement plan, can wait a season
The disciplined approach is to separate what the business needs in order to keep operating from what you intend to change. Diligence should already have drawn that distinction. The first is a cost of buying.
The second is your improvement plan: new systems, changed reporting, new pricing, reorganised roles. It belongs to you rather than to the seller, and it can wait until you have watched the business run for a season. Where part of the price depends on future results, changes you make can also move the measurement, which is a further reason to sequence them deliberately.
The integration checklist
Run the first season in this order, and make each change the only one in flight:
- Week oneconfirm payroll, banking, insurance and the accounting records are running under the new owner. Change nothing else yet.
- Month onemeet the staff, the main customers and the suppliers, and write down what you find rather than act on it.
- Month twolist what you intend to change — systems, reporting, pricing, roles — and what each change costs to run.
- Month threemake the first change, with a named owner and a date, and hold the rest.
- Before each changecheck whether it touches a figure the price depends on, such as an earn-out measure or the working capital definition in the completion accounts.
- Keep the two lists apart throughoutwhat the business needs to keep trading, which is a cost of buying, and what you intend to improve, which is your plan.
The cost of a delay
The most expensive item at this stage carries no invoice.
The purchase agreement usually carries a long-stop date, after which either side may walk away, so a late consent puts the whole deal at risk rather than just the timetable. A consent that arrived late can slip completion, meaning a funding approval may need renewing, advisers re-engaged, and staff have noticed something is happening.
The seller is running a business they have mentally left. If the delay moves the trading position, the buyer may reopen the price, and the seller has no good answer.
Against that, the fee for having a lawyer chase consents from the first week is small. A sale of this size warrants an intermediary, an accountant and a lawyer. The cost of the three is bounded, and the cost of the delay they prevent is not.
