Conditions to Closing

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Conditions to closing provide an acquirer with protection against not getting what it is paying for and create certainty for the seller. Basically, they regulate the steps that enable the two parties to close a transaction. they also regulate the “bring down” of reps and warranties (i.e. confirming that all reps and warranties are still true and accurate at the time of and as a condition to closing).
Conditions to closing regulate the consents the parties must seek, including antitrust (HSR) and other regulatory consent, such as FCC and FDA. Third party consents include minority shareholder consents and change of control provisions embedded in operating agreements or other contracts. It is important to limit the scope of the consents sought, as a buyer or seller may use the inability to obtain a non-material consent as a mechanism to terminate the deal. In a private transaction, there is usually no reason to condition closing on getting shareholder approval, since the shareholders will generally be the signatories of the contract.

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