Customary Closing Conditions are a set of loosely defined general conditions that need to be satisfied before the consummation of a merger or takeover. These conditions are generally found in the purchase or sale agreement. Both the target and acquirer have conditions that must be met or waived, and may also include joint responsibility conditions as highlighted in the table.
The table below summarizes the major customary closing conditions and upon whom the primary responsibility falls for deal completion.
| Conditions | Responsibility |
|---|---|
| Deal-Specific Conditions and Deliverables | Both |
| Delivery of Ancillary Documents | Both |
| Delivery of Closing Certificates | Both |
| Delivery of Purchase Price | Acquirer |
| Due diligence | Acquirer |
| Financing | Acquirer |
| Expiration of waiting period under HSR Antitrust Improvements Act | N/A |
| Litigation | Both |
| Material Adverse Effect | Acquirer |
| Required regulatory approvals (CFIUS, CMA, SAMR etc.) | Both |
| Shareholder approval - Cash deal | Target |
| Third-Party Consent | N/A |
Customary Closing Conditions Example
An example of closing conditions can be found in the 8-K filing with the SEC made by Fitbit (FIT) with regards to the proposed takeover from Google (GOOG, GOOGL). Article 7 – CONDITIONS TO THE MERGER, in the AGREEMENT AND PLAN OF MERGER highlights issues relevant to that deal. Specifically, section 7.01 lists the conditions to the obligations of each party.
Section 7.01 Conditions to the Obligations of Each Party.
The obligation of each party hereto to consummate the Merger is subject to the satisfaction or, to the extent not prohibited by Applicable Law, waiver of, as of the Closing, of the following conditions:
(a) Requisite Company Stockholder Approval. The Requisite Company Stockholder Approval shall have been obtained in accordance with the DGCL;
(b) Regulatory Authorizations. All applicable waiting periods (and any extensions thereof) under the HSR Act relating to the consummation of the Merger shall have expired or been terminated, the European Commission shall have issued a decision under the EC Merger Regulation declaring the Merger compatible with the common market, and the approvals, clearances and consents listed on Section 7.01(b) of the Company Disclosure Schedules (the “Specified Foreign Antitrust Approvals”) shall have been obtained, and
(c) No Injunction. No court of competent jurisdiction or any Governmental Entity having jurisdiction over any party hereto shall have issued any Order, nor shall there be in effect any Applicable Law or other legal restraint, injunction or prohibition (each of the foregoing, a “Restraint”) that makes consummation of the Merger illegal or otherwise prohibited.
