Legal Blog

M & A Nuggets: Year-End Closing?

december-31stIn the 1980s and 1990s, it was almost a rule that a purchase transaction being negotiated in the last quarter of a year had to close by December 31st.  Although the “rule” of closing a transaction on December 31st of a year has waned in recent years, there are relevant factors to consider on the timing of the closing.  Psychologically, a year-end business closing makes both sides feel good, starting off the New Year having achieved a major accomplishment.  From the buyer’s perspective, a year-end closing allows the buyer to incorporate the new business effective January 1st and thereby experience and report a full year of financial performance to the buyer’s owners and lenders.  From the seller’s perspective, on the one hand, a post-December 31st closing in the New Year allows the seller to defer gain, and defer paying tax on that gain, for one year.  On the other hand, a sale which occurs after December 31st in the New Year will result in the seller having to file an extra tax return for a short tax year from January 1st to the date of sale.  Other factors can affect the choice of a closing date throughout a year, such as when a substantial group of the seller’s employees typically take their vacations.  Pending changes in tax laws that go into effect in the next year can also affect the decision.  You should take all of these factors into account when deciding the timing of your closing.



Glenn D. Solomon Esq., is a principal at the law firm of Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years, with extensive experience in the purchase and sale of businessesstructuring ownership agreements, and advising companies in financial distress.







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