Deal timeline and gating items
Phases before signing add up; conditions after signing overlap, so the slowest one sets the closing date.
- Add up the phases from launch to signing
- Explain why the time from signing to closing is the longest condition, not the sum
- Identify the gating item and what it means for deal risk
- Work out a missing phase from the total
The intuition
Renovating a kitchen: the builder cannot order cabinets until the design is finished, and cannot fit them until they arrive. Those steps run one after another, so their lengths add up.
But once the work is booked, you are waiting on three things at once: the planning permit, the loan and the appliance delivery. They are not queued behind each other; they run side by side. You can start the day the slowest one arrives.
Before signing, the phases are sequential: add them. After signing, the conditions to closing run in parallel: the longest one sets the date. That longest condition is the gating item.
Why it works
- Before signing a sale runs in order: preparation, marketing, first-round bids, diligence and second-round bids, negotiation. Each needs the one before it.
- Signing is the binding purchase agreement. Closing is when the money and the shares actually change hands.
- Between them sit the conditions to closing: typically antitrust clearance (a standard waiting period, or months longer if the regulator issues a second request), a target shareholder vote, and sometimes a foreign-investment review.
- They run at the same time, so the time to close is the longest of them, not their sum.
- The gating item is where the risk lives. During the wait the seller runs the business under interim covenants and the market can move. Parties protect themselves with material adverse change clauses and, when antitrust risk is real, reverse termination fees.
| Launch to signing: 5 + 4 + 4 + 6 + 3 | 22 weeks |
| Signing to closing: the longest of 4, 10 and 13 | 13 weeks |
| Launch to closing: 22 + 13 | 35 weeks |
| Adding the conditions instead: 4 + 10 + 13 | 27 weeks (wrong) |
The formulas
Sequential phases add up.
Parallel conditions: the slowest one decides.
The whole sale.
The critical path.
Work the sequence backwards.
Worked example
Signing is behind you. Several conditions stand between signing and closing: find the one that decides the date.
See it move
Same deal. Stretch or shrink the phases before signing. Press "New company and numbers" for a deal with different conditions to closing.
- Lengthen any phase before signing. Signing and closing both move out by exactly the same number of weeks.
- Notice that no slider changes the wait after signing: it is set by the slowest condition alone.
- Press "New company and numbers" a few times. The wait after signing always equals the longest condition, never the sum.
- When a deal draws an antitrust second request, it becomes the gating item, because it is by far the longest review.
Run it backwards
Same deal, reversed: you know when it signed and how long every phase but one took. How long was the missing phase?
The phases before signing run one after another, so they add up exactly to the weeks to signing. Take the known phases away from the total and what is left is the missing one.
This would not work after signing: the conditions overlap, so the total tells you only the longest of them.
Traps
Say it in the interview
“What is the difference between signing and closing, and what decides how long it takes to close?”
Check yourself
4 fresh questions, with new numbers. Answer each one correctly to finish the chapter. Get one wrong and you will see the full working, then you can try it again with new numbers.
Answers within 1% are marked right. Type the number; $, %, x and M are fine. First tries count toward Learned: the topic is Learned once every chapter is done and 75% of first tries were right.
- Before signing: phases are sequential, so add them.
- After signing: conditions are parallel, so take the longest.
- The longest condition is the gating item, and the main timing risk.
- Signing is the contract; closing is when the deal completes.