Cannabis M&A: Common Closing Conditions
Most business purchase transactions we see in the cannabis space are structured to have a concept of “closing”, which I’ve described before here. Essentially, this means that the parties sign, there is some gap of time for them to take care of certain things, and then the business is sold.
Today, I want to examine those things that need to get taken care of in order for a deal to close, which are commonly referred to as closing conditions. Each party will specify its conditions to closing in the purchase agreement. If it turns out that one of them does not occur, then the party can either choose to waive the condition and proceed to closing, or walk away.
A lot of times, parties will implement what we call “drop-dead dates.” These are deadlines by which, if the closing has not occurred for any reason, one or both sides can terminate. This puts pressure on both sides to act quickly to get their closing conditions taken care of as soon as possible. In my experience, these dates can often end up getting pushed back a few times if the parties are doing their best to close and some condition beyond