Posted by Jennifer M. Settles, Esq.  |  October 8,  2026

Signing vs. Closing: Why Deals Don’t Always Happen in One Day

In the movies, a business deal ends with everyone signing a contract, shaking hands, and celebrating, all in the same room on the same day. In reality, many transactions separate the moment you sign the agreement from the moment the deal actually closes, sometimes by weeks or months. For anyone buying or selling a business, understanding the difference between signing and closing – and what happens in the gap between them – is essential, because that in-between period is where a surprising amount of risk lives.

Two Distinct Moments

Signing is when the parties execute the purchase agreement, committing themselves to the deal and its terms. Closing is when the transaction is actually completed – e.g., the money changes hands, ownership transfers, and the deal is done. Sometimes these happen simultaneously (a “sign-and-close”). But often there’s a deliberate gap between them, because certain things need to happen before the deal can close, and the agreement is signed first to lock in the commitment while those conditions are worked out.

Why a Gap Exists

A deal can’t always close the instant it’s signed because real-world conditions need to be satisfied first. Third-party consents may be required (for example a landlord approving a lease assignment, a key customer signing off, or a lender agreeing to the transfer). Regulatory approvals might be needed. Financing has to be finalized. Conditions the parties set for themselves must be met. The signed agreement essentially says, “We’re committed to this deal, and we’ll close once these specified things are taken care of.”

Conditions to Closing

The agreement typically lists “conditions to closing” – the things that must be true or must happen before either party is obligated to complete the deal. These often include obtaining required consents and approvals, obtaining the necessary financing for the deal, the accuracy of the other party’s representations remaining intact, no major adverse change in the business, and delivery of specified documents. If a condition isn’t satisfied, the affected party may not be required to close. These conditions are heavily negotiated, because they define each side’s outs and obligations.

The Risk in the Gap

The period between signing and closing carries real risk, because the business keeps operating, and things can change. The company could lose a major customer, suffer a setback, or have its circumstances shift between the day you signed and the day you’re supposed to close. Both sides need to think about who bears the risk if something goes wrong during this window, and the agreement should address it. This is precisely why the gap deserves careful attention rather than being treated as a mere formality.

Covenants: Rules for the In-Between

To manage that risk, purchase agreements include “interim covenants” governing how the business must be run between signing and closing. Commonly, the seller agrees to operate the business in the ordinary course, to preserve its value, and to refrain from major moves such as taking on big new obligations, selling off assets, or making significant payroll changes, without the buyer’s consent. These covenants protect the buyer by ensuring the business they agreed to buy is substantially the business they actually receive at closing.

What If Things Change? The MAC Clause

Agreements often include a “material adverse change” (or “material adverse effect”) provision – a condition allowing a party, usually the buyer, to walk away if something seriously damaging happens to the business between signing and closing. What counts as “material” is carefully negotiated and often litigated, because it determines whether a buyer can escape the deal when circumstances deteriorate. It’s one of the most important mechanisms governing the risk of the in-between period. Depending on the circumstances, using an objective and quantifiable definition of MAC can be very helpful to both parties.

Why Sign First at All?

If closing can’t happen immediately, why not just wait to sign until everything’s ready? Because signing locks in the deal. It commits both parties to the agreed terms and prevents either side from walking away freely or shopping for a better offer while the closing conditions are worked out. Signing turns a negotiation into a binding commitment, then gives everyone a defined framework—the conditions and covenants—for getting from commitment to completion. It provides certainty during what could otherwise be an open-ended limbo.    That said, in deed many deal do in fact sign and close simultaneously.

The Bottom Line

Signing and closing are two different milestones, sometimes occurring simultaneously and sometimes not.   If there is a delay in the closing, and the gap between the signing and the closing  is where consents are obtained, conditions are satisfied, financing is finalized, and risk is carefully allocated. The conditions to closing define each party’s obligations and outs, interim covenants govern how the business is run in the meantime, and provisions like the MAC clause address what happens if things change. Understanding this structure – rather than expecting a single dramatic signing day – is key to navigating a transaction with your interests protected throughout.

If you’re buying or selling a business and the deal won’t close the day you sign, the terms governing that gap can determine whether you’re protected if circumstances change. Schedule a free consultation to make sure the path from signing to closing is structured in your favor.  Contact us at www.jsettleslaw.com or (602) 617-3938.

About the Author

Jennifer M. Settles makes business owners’ lives easier. As a fractional General Counsel with 25+ years structuring M&A deals, commercial contracts, corporate governance, and complex real estate transactions, including over two decades as lead in-house transactions counsel for major corporations, she brings big-firm firepower to the founders, dealmakers, and growing companies who need it most. Clients describe her as knowledgeable, refreshingly direct, and relentlessly focused on their best interests. Jennifer offers white-glove, direct-access service and transparent, predictable fees. Learn more or schedule a consultation.