Conditions Precedent in Dutch M&A Deals

In Dutch M&A transactions, signing and closing often do not take place simultaneously. Between signing and closing, parties may still need to satisfy various legal, regulatory, financing or operational requirements before the transaction can complete.

Conditions precedent are used to allocate and manage these interim risks. They determine which events or approvals must occur before the buyer becomes obliged to complete the acquisition.

For earlier articles in this series, see M&A Insights: Dutch Deal Practice for Buyers, Sellers and Investors,

Why conditions precedent matter

Conditions precedent play an important role where the transaction cannot close immediately after signing. They protect the buyer and seller against uncertainties that still exist at the time the SPA is executed.

From the buyer’s perspective, conditions precedent may ensure that key approvals are obtained, financing becomes available or identified risks are resolved before completion takes place. From the seller’s perspective, the conditions should remain sufficiently objective and limited to avoid unnecessary uncertainty or closing delays.

The drafting of conditions precedent is therefore often heavily negotiated in Dutch M&A transactions.

Regulatory approvals

Some Dutch acquisitions require regulatory approvals before completion can occur. Depending on the sector and transaction structure, this may include merger control clearance, industry-specific approvals or screening under the Dutch Vifo Act.

Particularly in transactions involving sensitive technology, infrastructure or foreign investors, Vifo-related conditions precedent have become increasingly relevant in Dutch deal practice.

The SPA should clearly allocate responsibility for obtaining approvals, managing filings, cooperating with regulators and dealing with potential remedies or delays.

Financing conditions

Financing conditions are more common in certain mid-market and private equity transactions. A buyer may want completion to remain conditional upon obtaining acquisition financing or refinancing existing debt.

Sellers generally prefer limited financing conditionality because they want transaction certainty after signing. As a result, financing-related conditions precedent are often negotiated carefully and may be supported by debt commitment letters, equity commitments or reverse break fee arrangements.

Shareholder approvals and corporate actions

Certain Dutch transactions require shareholder approvals, board approvals or amendments to the articles of association before closing can take place.

This may involve approval rights under the articles, reserved matters in shareholders’ agreements or internal group approvals within the buyer or seller structure.

The SPA should clearly identify which corporate actions are required and who is responsible for arranging them before closing.

Works council and employee-related issues

Under Dutch law, works councils may have consultation rights in relation to acquisitions, restructurings or strategic transactions.

Where a works council exists, the transaction timetable should take the consultation process into account. Failure to comply with employee participation rules may create legal and practical complications between signing and closing.

In asset deals, employee transfer issues may also affect the conditions precedent structure.

For related employment issues, see Employee Transfer in Dutch Asset Deals.

Third-party consents

Some transactions require consent from customers, suppliers, lenders, licensors, landlords or other counterparties before the transaction can complete.

This is particularly relevant in asset deals, regulated sectors or contracts containing change-of-control provisions.

The parties should identify these consents early in the process because they can materially affect transaction timing and execution risk.

Long-stop dates and termination rights

Dutch SPAs usually contain a long-stop date. If the conditions precedent have not been satisfied or waived by that date, one or both parties may obtain the right to terminate the transaction.

The long-stop mechanism is important because it prevents parties from remaining indefinitely bound to an uncompleted transaction.

The SPA should clearly regulate:

• when a condition is deemed satisfied;
• which party bears responsibility for obtaining approvals;
• whether conditions may be waived;
• and what happens if completion ultimately becomes impossible.

Practical takeaway

Conditions precedent are one of the main tools used to manage risk between signing and closing in Dutch M&A transactions.

The key issues are regulatory approvals, financing certainty, shareholder approvals, employee consultation requirements, third-party consents and long-stop mechanics. Careful drafting is essential to balance deal certainty with legitimate transaction risk protection.

About Dirk de Waard

Dirk de Waard is a Dutch corporate and M&A lawyer focusing on mid-market and cross-border transactions. He advises buyers, sellers, investors and management teams on Dutch acquisitions, transaction structuring, governance and signing-to-closing execution.

Questions about conditions precedent or Dutch M&A transactions? Send an email to dirk.dewaard@viottalaw.com.