Conditions precedent (CPs) are events or actions whose occurrence is necessary for an acquisition transaction to produce its legal effects — in other words, for closing to take place. They are stipulated in the SPA at signing and must be satisfied between signing and closing. If a condition precedent is not satisfied within the agreed timeframe, the parties can typically terminate the transaction without penalties (absent fault by one party).

The most common conditions precedent in Franco-Swiss transactions include: obtaining acquisition financing by the acquirer (often the primary CP in mid-market LBOs), merger control authority approval (European Commission or French competition authority above certain thresholds), key client consents (in case of change-of-control clauses in contracts), sector regulatory authorisations (licences, approvals — particularly relevant for financial services companies under FINMA supervision), and satisfactory due diligence results (MAC — Material Adverse Change).

The signing-to-closing period (typically 1 to 4 months in Franco-Swiss mid-market transactions) is the period for satisfying conditions precedent. During this period, the seller continues managing the company under ordinary course covenants — without being able to carry out extraordinary transactions not provided for in the SPA.

Example: the SPA for the sale of a Franco-Swiss financial sector SME provides 3 conditions precedent: obtaining bank financing (45-day deadline), FINMA approval for transfer of the investment advisory licence (90-day deadline), and absence of MAC (materialised by a loss > CHF 500,000 before closing). The FINMA CP is the critical path — closing is set at D+95 after signing.

At Hectelion, we identify and structure conditions precedent in our M&A advisory mandates, assessing their feasibility and timeline before signature.