Most people picture a deal closing as a single, cinematic moment. Signatures fly, wires hit, hands get shaken, and everyone goes to dinner. Clean. Final. Done.
Then there are the deals that close twice.
Anyone who has spent real time in M&A has met this one. The transaction is ready to go — financing lined up, diligence wrapped, both sides motivated — except for one stubborn piece that simply will not be ready in time. Maybe it's a regulatory sign-off. Maybe it's a landlord, a lender, or a franchisor who needs to bless the transfer and is taking their sweet time about it. The rest of the deal is begging to close. That one piece isn't.
So instead of holding the whole transaction hostage to the slowest consent in the building, the parties split it. The bulk of the business changes hands now, at the main closing. The hold-out piece gets parked and transfers later, at a deferred closing, once the missing condition finally lands.
It's an elegant solution. It's also, for a buyer, a quiet little minefield. Here's how careful deal counsel tends to think about walking through it.
Why deferred closings happen in the first place
The most common culprit is consent. A surprising amount of what a buyer is purchasing can't actually be transferred without someone else's permission — a franchisor approving the new owner, a landlord consenting to a lease assignment, a key customer or supplier signing off on a change of control. When those consents are conditions to closing (as they almost always should be), and they don't arrive in time, the parties face two choices: blow the timeline, or restructure.
Deferring is the restructure. The un-transferable entities or assets get carved out of the main closing, conditions are set for when they can close, and everyone is given a runway to get the consents done.
The instinct, especially on the business side, is to treat the deferred piece as a formality — "we'll just close it next month." That instinct is worth resisting. The deferred piece is the part of the deal most likely to go sideways, precisely because it's the part that wasn't ready. The documents have to assume it might never close at all.
The risk nobody flags until it's too late
Here's the trap. Once a deal "closes," everyone exhales. The deferred piece becomes an afterthought — a loose end that someone will surely tie up. Months pass. The consent stalls. And now the buyer is sitting in an uncomfortable spot: it has paid (or committed to pay) for a business it doesn't yet own, with diminishing leverage to ever get it.
The whole game, from the buyer's side, is making sure the deferred closing is structured so that if it never happens, the buyer is made whole — automatically, without litigation, and without depending on the seller's goodwill.
That's the lens for everything below.
What belongs in the documents
1. A real drop-dead date — with teeth.
The deferred closing needs an outside date, and "time is of the essence" should mean it. Without a hard stop, a deferred closing can drift indefinitely while the parties "keep working on it." Pick a date, make it enforceable, and define exactly what happens when it passes.
2. A self-executing failure mechanism.
This is the provision that deserves the most attention. If the deferred piece doesn't close by the drop-dead date, the documents should do the unwinding “by themselves”. The deferred entities drop out of the deal. The purchase price reduces — permanently — by the allocated value of that piece. Any money held back gets released to the buyer. No new negotiation, no signatures required, no leverage handed back to a seller who has every reason to stall. A failure provision that requires the parties to cooperate to unwind is a provision that fails exactly when it's needed most.
3. An escrow holdback tied to the deferred value.
A buyer shouldn't pay full freight for a business that hasn't transferred. The value allocated to the deferred piece should sit in escrow, with release tied to the deferred closing actually occurring. If it closes, the money flows to the seller. If it doesn't, it comes home to the buyer. This is the difference between a clean walk-away and a lawsuit.
4. Conditions that travel with the deferred piece.
Every condition that protected the buyer at the main closing — accurate representations, delivered consents, the absence of any injunction or breach — should apply again at the deferred closing, tested as of *that* date. The world changes between closings, and the buyer wants the right to walk if it's changed for the worse.
5. Survival periods that account for the gap.
Representations and warranties usually survive for a set period after closing. But the deferred piece closed later, which means its survival clock should start later too. Without extending (or tolling) the survival period for the deferred assets, a buyer can end up with indemnity coverage that expires almost as soon as it finally takes ownership. The extra time needs to be built in.
6. Interim covenants that keep running.
Between the two closings, the deferred business is operating — but the seller still controls it. The covenants that governed how the business had to be run before the main closing (operate in the ordinary course, no leakage, no funny distributions, no surprise liabilities) need to keep applying to the deferred piece right up until “its” closing. The goal is simple: the business the buyer eventually receives should look like the business it agreed to buy, not whatever it became while it sat in limbo.
7. A plan for the consent that's holding everything up.
Waiving the timing of a consent is not the same as waiving the consent itself, and the documents should say so in plain terms. They should spell out who's responsible for chasing it, what cooperation looks like, and — critically — that any amendment a third party demands as the price of consent can't quietly stick the buyer with new obligations. Consent at the cost of a worse deal isn't consent; it's a renegotiation in disguise.
8. A backstop if the second closing fails.
Some deals are structured with a "springing" amendment — a set of terms that only takes effect if the deferred closing falls through. That Plan B is worth thinking through early, while everyone is still friendly, rather than improvising it later when they're not.
The point of all this structure isn't lawyers being lawyers. A deferred closing is, at bottom, a bet that something outside the buyer's control will go right within a fixed window. Every provision above is just a way of making sure that if the bet doesn't pay off, the buyer isn't the one left holding the bag.
The best version of this work is invisible. The consent comes through, the deferred piece closes, the holdback releases, and nobody ever thinks about the careful machinery that would have kicked in if it hadn't. That's the goal — to build the safety net so well that it's never needed.
But it gets built anyway. Because the deals that close twice are exactly the ones where the second close is the one that doesn't.
This post is for general informational purposes and reflects considerations that can arise in M&A transactions involving staged or deferred closings. It is not legal advice, and every deal turns on its own facts and documents. Anyone working through a transaction with a deferred-closing component should consult qualified deal counsel about their specific situation.