Why Deals Stall and How to Get Them Across the Finish Line

Acquiring a restaurant, bar, hotel, or other hospitality business in New York seldom closes on schedule. The main sources of delay are liquor license approvals, lender consents, unresolved labor or tax liabilities, and successor-liability exposure. Without clear contingencies, a deal expected to close in 90 days can stretch to six months or collapse outright. This analysis explains how these timing pitfalls arise and how disciplined structuring can prevent them.

The Liquor License Hurdle: No Free Transfers in New York

Unlike many jurisdictions, New York prohibits the direct sale or assignment of a liquor license without regulatory approval. The New York State Liquor Authority (SLA) views each license as a privilege granted to a qualified operator, not as an asset that can be freely transferred with the business.

When acquiring a hospitality business that holds a liquor license, the buyer must typically file a “transfer” or new license application with the SLA. The process includes background checks, community or municipal notices, and full agency review. Depending on how complete the submission is, the SLA’s workload, and whether objections arise, approval can take several weeks to several months.

To avoid an interruption in operations, the SLA may issue a Temporary Operating Permit (TOP) that allows the buyer to continue under the seller’s license privileges while awaiting final approval. These permits are discretionary, time-limited, and subject to renewal restrictions, so they cannot be relied on as a guaranteed bridge to closing.

In short, even when buying what appears to be a “licensed business,” the liquor license itself remains uncertain until the SLA formally approves the buyer’s application.

Financing and Lender Consent

In hospitality transactions, debt arrangements are frequently intricate, involving real estate mortgages, asset-based loans, equipment liens, working capital facilities, and more. You cannot presume that lenders will readily approve your acquisition.

Lenders generally require their own due diligence, which includes updated appraisals, environmental assessments, renewed guarantees, audited financial statements, and possibly additional covenants or collateral. This process can take several weeks. If lender approval is delayed, the closing may be postponed or conditional. I've even had cases where the lender introduced new terms to the deal.

Frequently, it's necessary to conduct SLA approval alongside lender diligence. If either process encounters delays, the whole closing can be jeopardized. It's crucial to ensure that the lender and license processes are synchronized (for example, having the same critical deadlines, exceptions, and exit strategies).

Another key consideration is the transition of cash management, operating accounts, and vendor payments. These functions must continue without interruption during the transaction. Lenders often insist on reserves or escrow accounts to cover working capital gaps or contingent obligations, ensuring liquidity remains stable through closing.

Labor, Tax, and Successor Risk: Hidden Liabilities That Appear Late

If the seller has outstanding payroll, tip, wage, or overtime liabilities—or unpaid withholding or sales taxes—those obligations can resurface after closing as claims against the buyer. The risk is heightened in the hospitality sector, where wage-and-hour compliance is intricate and enforcement is active.

Under New York law, a buyer in an asset purchase is ordinarily shielded from the seller’s pre-closing obligations. However, that protection is limited—courts apply the doctrine of successor liability to impose responsibility when the transaction effectively continues the seller’s business or circumvents its debts.

Courts in New York recognize four principal triggers of successor liability:

1. The buyer expressly or impliedly assumes the seller’s liabilities.

2. The transaction is really a merger (de facto merger).

3. The buyer is a “mere continuation” of the seller (same business, same operation).

4. The transaction is entered into fraudulently to evade obligations

Recent decisions from the New York Court of Appeals have further reshaped the successor liability landscape by expanding the concept of successor jurisdiction, exposing acquirers to the same forum reach as their predecessors.

In Lelchook v. Société Générale de Banque au Liban, the New York Court of Appeals held that a buyer acquiring all assets and liabilities of a seller—even without a formal merger—steps into the seller’s shoes for purposes of specific personal jurisdiction. Practically, this removes territorial defenses: if the seller could be sued in New York, the buyer likely can be too.

Given this landscape, protections such as caps, indemnities, and carveouts must be drafted with a clear understanding that New York courts now interpret successor liability and jurisdiction more aggressively than in the past.

How to Structure the Deal to Absorb Timing Risk

Timing risk can’t be eliminated, but it can be controlled through disciplined deal mechanics. The most effective transactions anticipate delays and embed structural safeguards from the outset.

• Condition precedent closing mechanics

  Treat key approvals—such as SLA license issuance, lender consent, and tax clearance—as conditions precedent to closing. Do not waive them early; once the deal funds, leverage is gone and unresolved contingencies become post-closing exposure.

  
  

• Drop-dead / break-up mechanics

  Set a firm deadline for each required approval and build in limited extension rights, tied to defined costs or penalties. If approvals remain outstanding after those extensions, either party should have a clear termination option without ambiguity or litigation over timing.

  
  

• Escrows, holdbacks, and indemnity reserves

  Set aside a portion of the purchase price in escrow to secure against latent liabilities such as wage audits or tax assessments. Draft indemnification provisions with meaningful caps, baskets, and survival periods so the buyer has real recourse if hidden exposures surface post-closing.

  
  

• Interim operating / management agreements

  Between signing and final approvals, the buyer can operate under a management or license agreement with the seller’s consent. The agreement should define operational control, allocate liabilities precisely, and set firm termination triggers to prevent disputes if approvals are delayed or denied.

  
  

• Seller cooperation obligations

  Require the seller to deliver affidavits, municipal and zoning confirmations, proof of compliance, and prompt responses as express contractual obligations. Failure to cooperate should trigger defined remedies—fee shifting, purchase price adjustments, or termination rights—rather than open-ended disputes.

  
  

• Structured sequencing

  During the LOI stage, pinpoint licensing, lender, labor, and municipal risks before price and structure harden. At signing, have preliminary materials ready for regulators and lenders so approvals start immediately. After execution, run the SLA and lender processes in parallel. Waiting to begin either track until post-signing almost guarantees delay.

In New York hospitality M&A, regulatory approvals, lender consents, and legacy liabilities aren’t administrative hurdles, they are the primary forces that determine whether a deal closes on schedule or at all. Buyers who treat them as secondary often find themselves forced into delay, renegotiation, or litigation. Those who sequence approvals early, allocate risk clearly, and build fallback mechanisms into the purchase agreement give themselves the best chance of closing on time—and keeping the deal intact.