Completion, conditions precedent and where the money actually goes

Exchange, completion, and why they are sometimes the same day

In many business sales, exchange and completion happen simultaneously: the documents are signed and the money moves on the same day. Where something has to happen in between, a consent to obtain or a condition to satisfy, the two are split, and there is a period during which both sides are contractually committed and the business has not yet changed hands.

Which model applies is decided by the conditions. If everything can be cleared beforehand, simultaneous is simpler and it is what most SME deals aim for. If a landlord's consent or an accreditation transfer will not be ready, splitting them is how the deal keeps moving.

Conditions precedent, which is the list that moves the date

A lender does not release funds because a date has been agreed. It releases funds when its conditions precedent have been satisfied, and that list is the single most common reason a completion date moves.

Some are the buyer's, some are the seller's, and some belong to third parties who have no interest in the timetable. Typically the list includes:

• The signed facility agreement and all security documents executed.
• Charges over the trading company and, where relevant, over the shares being acquired.
• Cross guarantees between the buying vehicle and the target where the structure requires them.
• Personal guarantees signed, with independent legal advice certificates where the lender requires them.
• Any subordination or priority deed signed by all parties, including the seller, which is covered in vendor finance.
• Evidence of the buyer's contribution, in cleared funds, in the right account.
• Insurance in place from completion, with the lender noted where required.
• Property matters: title, searches, and any landlord consent to assignment or change of control.
• Confirmation that the diligence findings relied on have not changed.
• The completion statement and funds flow agreed by everybody.

Two of those are worth pulling forward as early as possible. Third-party consents run on somebody else's diary, and independent legal advice for a guarantor means finding a separate solicitor, booking an appointment and having a conversation that is not a formality. Both are routinely left until the fortnight before.

The funds flow, and what leaves before the seller sees it

Buyers are often surprised by how much of the facility never reaches the seller. The completion statement sets it out, and it is worth reading in draft rather than on the day.

The arrangement fee on the facility is usually deducted from the advance rather than invoiced separately. The lender's legal fees, valuation fees and security registration costs are the borrower's. The buyer's own legal and accounting fees fall due around the same time. Any existing borrowing in the target that is being repaid comes out of the proceeds. Then the completion accounts adjustments apply: cash and debt in the business, and whether working capital is above or below the agreed level, though those are often settled after the day rather than on it.

What is left is the completion payment to the seller. The deferred element is not paid, by definition, and its schedule starts running from this date.

Worked exampleTake a buyer who has budgeted the purchase price precisely and arrives at completion with nothing spare. The arrangement fee is deducted from the advance, the lender's legal costs are charged to the facility, and the first month's professional fees fall due the same week. The shortfall is small in the context of the deal and it lands on the one day there is no room to solve it. The situation is a shape, not a real transaction.

What happens on the day

Less drama than most buyers expect. Solicitors confirm the documents are ready and in agreed form. The lender confirms its conditions are satisfied and releases funds to the buyer's solicitor. Signatures are exchanged, usually electronically. Money moves through the solicitors' accounts in the order set out in the funds flow. Company records are updated, and in a share purchase the register of members is written up and the stock transfer forms are dealt with.

Then the part that matters more than any of it. The staff are told, in person, by the new owner, that day. Everything about the first hundred days starts from how that conversation goes.

The week afterwards

Several things have deadlines attached, and one of them is unforgiving. Charges created in favour of the lender must be registered at Companies House within twenty-one days of creation, and a missed registration can leave the security void against a liquidator or another creditor. It is the lender's solicitor's job and it is worth confirming it has been done.

Alongside that: notifying customers and suppliers in the agreed order, insurance and any bonds moved into the right name, banking mandates changed, payroll and pension arrangements confirmed, contracts novated where an asset purchase requires it, and utilities, licences and software accounts transferred. Where staff have transferred under TUPE, the employment obligations that came with them apply from day one.

Accreditation transfers deserve their own line in that list. In fire and security and other certified trades, the approval that lets the business take on work is often a condition of completion rather than a tidying-up job afterwards, and the certifying body works to its own timetable.

The working capital facility, if there is one, should be live from completion rather than applied for afterwards, for the reasons set out in working capital.

What goes wrong

The conditions list arrived late. A list produced in the final fortnight contains at least one item that takes longer than a fortnight.

A guarantor could not get independent advice in time. A solicitor appointment nobody booked, holding up a completion everyone else was ready for.

The funds flow was seen for the first time on the day. Every fee is negotiable at term sheet stage and none of them are negotiable at completion.

The subordination deed was still unsigned. Three parties, one of whom is the seller, discovering the ranking question in the last week.

Nobody planned the first week of trading. Completion is the beginning of the operational job, and a buyer who spent everything getting there has no capacity left for the part that decides whether it worked. What that period demands is set out in the first hundred days, and what diligence should have settled before it is in due diligence.

Getting to a completion that holds

A completion date that holds is one where the conditions were known early and cleared steadily. Lenders differ substantially in what they require and in how quickly their security work moves, and that difference is not published anywhere.

We know this market and we know specific people who fund acquisitions in these sectors, including how they work and what they will ask for before releasing funds. Terms that appear on a completion statement and nowhere else are in the glossary.

Tell us the shape of the deal and the date you are working to. We come back to you with who can fund it and what they will want to see.

We introduce buyers who are acquiring through a limited company or a NewCo. If you are buying personally, as a sole trader or as a partnership, we will point you to an authorised firm directly instead.