Waiting on a Regulator While a Sale Process Quietly Weakened

The situation

The board had tried to keep the original timeline alive on its own for nearly four months before Sari called us. The company, a mid-sized software business based in King City serving institutional clients, had signed an agreement to be acquired by a larger competitor in a transaction valued in the thirty to fifty million dollar range, contingent on a regulatory review because the buyer's ownership structure required a specific government approval before the transaction could close. Sari had spent the first half of her career as a software developer before moving into management, and her technical background was part of why the board had trusted her to chair the sale process rather than hand it entirely to outside advisors. The board, led by Sari as chair, had assumed the review would take a matter of weeks, consistent with what the buyer's counsel had estimated, and had scheduled the outgoing directors' resignations and a management transition plan around that assumption.

The approval did not come in weeks. It stretched past two months, then three, then four, with no clear indication from the reviewing body about when a decision might follow. During that stretch, the company's own performance began to soften, not dramatically, but enough to matter: a large client delayed a renewal decision pending clarity on the ownership change, and two mid-level engineers left for competitors rather than wait out an uncertain acquisition. Sari's board had tried managing this themselves, sending periodic updates to the buyer and hoping the numbers would hold until closing, but by month four it was clear the delay itself, not the underlying deal terms, had become the central problem.

Takeshi, an accountant by training who had risen to become the company's chief financial officer and a board member, and Indah, an outside director who chaired the audit committee, had both begun raising a separate concern with Sari: what happened to the outgoing directors' personal liability exposure if the deal fell apart or closed on worse terms after this much delay. The company's existing directors and officers insurance was written to expire at closing, on the assumption closing would happen close to the original schedule, and nobody had planned for a policy gap if the timeline stretched this far.

Sari came to us not with a request to fix the regulatory process, which was outside anyone's control, but with two more immediate questions: how to manage the deal's financial terms fairly given how much had changed since signing, and how to make sure she and her fellow directors were not left personally exposed by a delay none of them had caused.

The risk we had to size

The first risk was financial and shared between buyer and seller: the business the buyer had agreed to pay for was not quite the business it would be acquiring by the time the approval finally came through. The delayed client renewal and the departed engineers were modest in isolation, but together they represented a measurable dip in the metrics the original purchase price had been built around. Someone had to decide whether that dip belonged to the seller, the buyer, or somewhere in between, and the purchase agreement's language on this point was general rather than specific, since nobody had drafted it expecting a delay this long.

The second risk was personal to Sari, Takeshi, Indah, and the rest of the outgoing board, and it was less visible but potentially more serious. Directors and officers coverage protects board members against claims arising from decisions made while they served, but coverage that ends at closing leaves a gap for claims that surface afterward, related to conduct during the board's tenure, once there is no longer an active policy in place to respond. The longer the delay stretched, the more decisions the board had to keep making, about managing the softening client relationship, about compensation adjustments to retain remaining staff, about what to disclose to the buyer and when, each one a potential future claim if a dissatisfied shareholder or the buyer itself later took issue with how it was handled.

What made sizing this risk difficult was that the delay's endpoint was genuinely unknown. The regulatory body reviewing the buyer's ownership structure gave no firm date, and the board could not simply wait to address the insurance gap until closing was imminent, because a run-off policy covering past conduct needs to be arranged and bound before the original coverage lapses, not after. If the existing policy expired while the deal was still pending, there could be a period with no coverage at all, exposing the board to exactly the kind of claim a run-off policy exists to prevent.

There was also a negotiating dimension. Raising the price adjustment and the insurance gap with the buyer at the same time risked looking like the seller's board was trying to extract additional value from a situation the buyer had not caused either, since the regulatory delay was outside both parties' control. Sari needed both issues handled in a way that acknowledged shared bad luck rather than assigning blame, while still protecting the company's shareholders and the board members personally.

What we did

1. Reviewed the existing insurance policy's expiry terms first. Before addressing anything else, we confirmed exactly when the current directors and officers policy would lapse and what triggered that expiry, reading the policy's own definitions closely rather than assuming closing itself was the trigger. That distinction mattered, because it told us how much real time remained to arrange replacement coverage before a gap opened up, and it meant we were working from the policy's actual language rather than the board's informal understanding of it.
2. Sourced run-off coverage for the outgoing board. We worked with an insurance broker experienced in transaction-related coverage to obtain a run-off policy specifically covering claims arising from conduct during the outgoing board's tenure, extending protection for several years past closing regardless of when the deal actually completed, since a policy tied to a fixed date rather than a fixed period would have left the board exposed again if the approval slipped further.
3. Negotiated who would pay for the run-off policy. Because the delay was not the seller's fault, we negotiated with the buyer's counsel to share the cost of the run-off premium, framing it as a reasonable response to an unusual delay rather than a concession either side owed the other, which let the conversation proceed as a practical cost-sharing discussion instead of a dispute over blame.
4. Bound the policy before the existing coverage lapsed. Rather than waiting for closing, we arranged for the run-off policy to bind on the date the existing policy would otherwise expire, closing the potential gap entirely regardless of how much longer the regulatory review continued, since a policy bound only at closing would have left the board with no coverage at all during the months the approval remained pending.
5. Documented the softened metrics carefully and factually. We worked with Sari and the company's finance team to prepare a clear, factual account of the delayed renewal and the departed engineers, distinguishing the impact of the delay itself from any suggestion of underlying business weakness, to support a fair conversation about price grounded in specific, dated events rather than a general sense that things had gotten worse.
6. Proposed a defined, capped price adjustment. Rather than an open-ended renegotiation, we proposed a specific, capped adjustment to the purchase price reflecting the documented impact of the delay, giving the buyer certainty about the maximum change while giving the seller protection against absorbing the full cost of a delay it had not caused, which kept both sides from treating the softened numbers as an invitation to reopen the entire valuation.
7. Kept the two issues on separate negotiating tracks. We deliberately handled the insurance conversation and the price adjustment conversation through separate correspondence with the buyer's counsel, so neither issue was used as leverage against the other and each could be resolved on its own merits, rather than letting the buyer trade a concession on one for a worse outcome on the other.
8. Monitored the regulatory file and kept the board informed. We maintained regular contact with the buyer's counsel about the status of the approval, so the board always knew where the process stood and could plan the transition realistically rather than continuing to assume an imminent close, which also meant Sari had accurate information to give the company's staff and clients instead of repeating an estimate that kept proving wrong.
9. Prepared the board for a range of possible endings. Because the regulatory timeline remained uncertain even after months of waiting, we walked the board through what would happen under a further delay, an outright approval, or a rejection, so that Sari and her colleagues were not making decisions about staff retention and client communication based on hope alone but on a realistic sense of the paths still open to them.

The outcome

The regulatory approval came through just over six months after the original signing, roughly two months later than the board's already-extended expectations. By the time it arrived, the run-off policy had been in place for weeks, meaning there was no point at which Sari, Takeshi, Indah, or any other outgoing director had gone without coverage, regardless of how long the wait had ultimately stretched.

The purchase price was adjusted downward by a modest, capped amount reflecting the delayed renewal and staff departures, a real concession but a contained one, negotiated before either side's frustration with the process turned the conversation adversarial. The buyer shared the cost of the run-off premium as agreed, which kept the total financial impact on the sellers smaller than it would have been had the seller borne the full cost of both the price adjustment and the insurance alone.

Sari's board completed its transition once the deal closed, and the run-off policy remained in place for several years afterward as agreed, covering the period during which any claim connected to the board's pre-closing decisions could still reasonably surface. No such claim materialized, but the directors closed out their service to the company knowing the exposure had been addressed properly rather than left to chance during a delay that none of them had been able to control.

The client whose renewal had stalled during the uncertainty ultimately signed on under the new ownership within a few months of closing, and only one of the two departed engineers' roles needed to be backfilled externally, since the acquiring company absorbed the other function into its existing team. Neither outcome fully undid the dip that had shaped the price adjustment, but both suggested the softening had been a symptom of the delay rather than a sign of a deeper problem with the business, which was consistent with what Sari's team had argued to the buyer throughout the renegotiation.

For Sari personally, the clearest measure of the outcome was the one that never happened: no claim, no dispute over the run-off coverage, and no period where she or her fellow directors had to wonder whether a decision made in the company's final months as an independent business might come back to find them unprotected.

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