Split Exchange in Corporate Transactions: Lessons learnt from the Netflix and Warner Bros. Discovery deal

Split Exchange in Corporate Transactions: Lessons learnt from the Netflix and Warner Bros. Discovery deal | Wednesday 15 July 2026 | 4 min read

In many share acquisitions and business and asset acquisitions, the agreement is exchanged and completed on the same day. However, this is often not achievable, and a split exchange and completion is a common feature of UK mergers and acquisitions. It enables parties to sign a binding agreement while deferring completion until set conditions are satisfied. The Netflix Inc. and Warner Bros. Discovery, Inc. (WBD) deal highlights that whilst this approach is useful for complex or regulated deals, it introduces timing and execution risks that must be managed carefully.

What Is Split Exchange?

A split exchange and completion is when a transaction is split into two stages occurring on different dates: (1) signature and exchange of the acquisition agreement where the parties become legally bound to the transaction; and (2) transaction completion where title to the acquired shares or assets passes to the buyer and the purchase price is paid.

This commonly arises when the parties’ ability to proceed with the transaction is dependent upon obtaining third party or regulatory authority consent, financing or the carve out of assets or companies. Completion is deferred until these conditions precedent are satisfied. This “interim period” between the two stages can run from days to months and is governed by provisions on risk allocation, interim conduct, and termination rights.

The main advantages of a split exchange are:

• Certainty of commitment. After exchange, parties are legally bound to complete subject to the condition precedents, which can lock in price and reassure stakeholders.
• Facilitating complex deals. Parties can accommodate regulatory approvals and pre‑closing reorganisations such as carve‑outs whilst ensuring both sides are committed.
• Commercial flexibility: Parties can stage the transaction to align with financing, tax, or strategic timing.

Disadvantages of this approach can include:

• Execution risk: completion may never occur, with greater exposure as the interim period lengthens due to regulatory delays, financing issues, and market volatility.
• Value leakage and business risk: During the interim period, the target may suffer adverse changes, lose key contracts or personnel, or be affected by wider economic conditions.

Case Study: Netflix and Warner Bros. Discovery

On 5 December 2025, Netflix Inc. announced that it had signed a definitive agreement to acquire Warner Bros with completion expected after the separation of WBD’s Global Networks division, Discovery Global, which was expected to finish in late 2026. The prolonged split exchange and completion attracted attention at the time and there was little surprise when the deal ultimately failed.

How Split Exchange Shaped the Outcome

The primary reason the deal failed was WBD’s ability to consider Paramount’s higher all‑cash offer and Netflix’s refusal to match the higher bid. However, the extended split exchange and completion contributed to this uncertainty and competitive exposure that allowed the deal to unravel. It enabled rival bids, increased market and shareholder pressure on valuation, and amplified execution uncertainty from the multi‑step structure.

Practical Takeaways

• Define clear, objective conditions precedent and a realistic long stop date for completion. The shorter the split exchange and completion gap the better.
• Interim operating covenants and information rights should protect value without unduly restricting ordinary business.
• Stress‑test financing and regulatory pathways early, with contingency plans for delays or remedies.
• Consider completing any necessary restructuring or carve out of group companies as part of your exit planning process and before seeking buyers.
• Plan communication to manage stakeholder expectations during the interim.

Split exchange and completion can unlock complex deals by providing early commitment while essential steps are completed. The benefits come with heightened execution and competitive risks. Careful structuring, rigorous conditions and covenants, and proactive regulatory and financing planning are central to making a split exchange and completion work in practice.

If you are considering a transaction with a gap between signing and closing, we can help assess the risk profile and shape the contractual protections to your objectives.