My many years of practice taught me that clients usually want to close their transactions quickly.
You would think that they would want to close when everyone involved has had the time to do the job properly, but that does not seem to be the case. Apparently, ‘quickly’ is when deals have to close. Now, in fairness, there is often a good reason to close a deal quickly. A business reason, or a tax reason, perhaps. But, more often than not, the desire to close the deal quickly seems to constitute an independent, over-reaching, crucial goal.
The date at which clients want to close their transactions is usually earlier than the date that the lawyers can complete the legal work properly. Often, much earlier. But clients do not typically want to hear that. As a result of these dynamics, transaction lawyers have learned to play games when they talk about closing dates. I am not speaking about the types of closing dates that are in legally binding contracts with no outstanding conditions. I am talking about those other closing dates. The type that everyone is always ‘working towards’.
There was a time before I learned how to play the closing date game. Back then, when a client asked me how soon a transaction could be closed, I would consider all of the work that had to be done by everyone involved, the time it would take to handle the due diligence, which third parties had to consent and how fast they might move, and a whole host of other legal and business considerations. Then I would give the client my best estimate of a reasonable closing date. In other words, I would be completely honest with my client. Like we are supposed to be.
The problem which I found myself continually running into is that the honesty game requires at least two players. Unfortunately, while I was trying to be honest, the other side’s lawyer invariably seemed to be currying favour with their client by promising that the deal could be closed impossibly soon. Their client would tell my client. My client would want to know why I was the only one involved who was not willing to do whatever it took to get the deal done by some date which everyone else said was reasonable, and only I thought was arbitrary and impossible.
Back in those days, I seemed to always be facing the same dilemma. I could tell the clients the truth at the risk of appearing to be creating unnecessary obstacles, or I could agree that we would try to make the impossible deadline.
I am sometimes a slow learner, but eventually I figured out that there was no percentage in being pathologically honest. I learned to not quite lie, but to be sure that I was not perceived as the problem child in the room.
Of course, the deal would never close by the ridiculous deadline that we were all supposedly doing our best to meet, and a new impossible deadline would be set. After three or four go-rounds, the transaction would eventually be completed around about the time that I originally said it might close.
Someone once taught me that if you want people to tell you the truth, you have to accept the truth when you hear it from them. If people know that you will argue with them when they tell you the truth, they will lie to you. When it comes to closing dates, everyone playing the game has pretty much learned to stretch the truth a bit.
This can all be pretty confusing for clients who are new to the game. This is sort of ironic, since it is usually the client who initiates the game by pushing their lawyers to agree to an unrealistic closing date. In order to help clear up the confusion, I offer to clients the following assistance in translating the ‘lawyer talk’ that takes place in the closing date game to plain English:
- When your lawyer says: “Of course I will do everything that I can to get this closed by the end of January” they actually mean, “We will be closing by the end of March. If we are lucky.”
- When your lawyer says: “I will do our best to get this closed in a month,” they actually mean, “Are you insane? This deal will take at least 3 months to close.”
- When your lawyer says: “That date might be achievable if both sides and their counsel are reasonable and cooperative”, they actually mean, “There is no chance in hell that we will meet that date.”
I hope that this helps.