Pre-Closing Compliance Guide
The pre-closing phase is the most critical period for risk management. At Mage, we help you track regulatory approvals (HSR, CFIUS), third-party consents, conditions precedent, and closing deliverables so nothing falls through the cracks as you approach closing.
Antitrust: Hart-Scott-Rodino (HSR) Act
Size-of-Transaction Test
Does the deal value exceed the annual threshold?
2024 Threshold: ~$119.5M (adjusted annually)
Size-of-Person Test
For deals between lower and upper thresholds:
One party >$239M AND other party >$23.9M (assets/sales)
HSR Pre-Closing Actions
Prepare Notification & Report Form
Revenue data by NAICS code, subsidiary lists, Item 4(c) and 4(d) documents
File with FTC & DOJ
Submit filings and pay sliding-scale filing fee
Monitor Waiting Period
30-day waiting period (15 days for cash tender offers)
Consider Early Termination (ET)
Note: FTC/DOJ suspension of ET grants varies by administration
Prepare for Second Request
Additional information request if agency has competitive concerns
Foreign Investment: CFIUS
Committee on Foreign Investment in the U.S. (CFIUS) reviews transactions involving foreign persons acquiring control or access/rights in U.S. businesses.
TID Business Categories (Heightened Scrutiny)
Mandatory Filing
- Foreign government has substantial interest in acquirer AND target is TID business
- Certain critical technology investments
Voluntary Filing
- Recommended for "grey area" transactions
- Obtain "safe harbor" letter to prevent future review
CFIUS Review Timeline
Third-Party Consents & Notices
Review target's material contracts for "Change of Control" or "Anti-Assignment" clauses. Missing consents can trigger defaults or deal failure.
Commercial Contracts
- Identify key customer, vendor, IP license agreements
- Draft formal consent request letters
- Send "negative consent" notices where allowed
Real Estate Leases
- Landlord consent required for most commercial leases
- Failure can trigger default/eviction
Lenders / Debt
- Obtain payoff letters for existing debt
- File UCC-3 termination statements to clear liens
Conditions Precedent (CPs)
These are the specific events that must occur before the parties are legally obligated to close.
Accuracy of Representations & Warranties
Reps must be true at signing AND at closing
No Material Adverse Effect (MAE)
Target has not suffered catastrophic business decline since signing
Regulatory Clearances
HSR expiration/termination and CFIUS approval (if applicable)
Shareholder Approval
Certified copies of Board and Shareholder resolutions
Financing
Buyer confirms receipt of debt/equity funding
Key Employee Retention
Execution of new employment agreements with key executives
The Bring-Down Certificate
The Bring-Down Certificate is the bridge between signing and closing. It prevents the Buyer from inheriting a company fundamentally different from what they agreed to buy.
What It Is
An officer's certificate delivered at closing certifying that the Reps and Warranties made at signing are still true and correct as of the closing date.
Attorney Duties
- Drafting: Typically by Buyer's counsel; reviewed by Seller's counsel
- "Scrape" Review: Ensure materiality scrapes match PA terms
- Disclosure Updates: Determine if new disclosures are needed
Disclosure Schedule Updates
Updating disclosure schedules often requires Buyer consent or may give Buyer a right to walk away from the deal. Handle with extreme care.
Closing Deliverables Checklist
From the Seller (Target)
From the Buyer
Joint / Third-Party Items
"Close and Sue" Warning: Sandbagging
If the Buyer discovers a breach of the Bring-Down Certificate before closing but closes anyway, can they sue for indemnification later?
Pro-Sandbagging
Buyer can close on a known breach and sue later. Buyer-favorable.
Anti-Sandbagging
If Buyer knew of breach and closed, they waived the right to sue. Seller-favorable.
Attorneys must verify which standard applies in the Purchase Agreement.
How Mage Supports Pre-Closing Compliance
Consent Tracking
Extract and track all change of control provisions requiring third-party consents
Checklist Automation
Auto-generate closing checklists from your document review with status tracking
Disclosure Mapping
Link discovered issues to disclosure schedules for bring-down certificate preparation