“How long will this take?” is one of the top 5 questions asked when we meet with prospective sellers considering an exit strategy. And the truth is, it depends. It depends on how marketable your company is. It depends on how large the buyer pool is. It depends on how quickly you can pull together diligence information. It depends on how good the outside advisors are – yours and theirs.
On average, it takes 6-9 months from engagement through closing. We’ve had closings as fast as 3-4 months and transactions that have taken longer than 12 months.
Here are some of the factors that separate the fast transactions from the slow transactions:
- Seller is available. This means the seller is relatively accessible to get on intro calls and host onsite visits. If it takes a week each time a call needs to be scheduled, the process can quickly extend by months.
- Fast turnaround. When the seller can respond to diligence items and requests quickly, the diligence window narrows significantly. Our fastest transactions have taken place when the seller was able to knock out diligence in a week. Most diligence timelines are 2-3 weeks. Ideally, there are a few key people in the Company who can help compile diligence information needed (even if they are kept blind to the transaction process), to compile everything in a timely manner.
- Knowledgeable and timely advisors. Choosing the right advisors is important. You need advisors who know the M&A industry and does this every day. Your team should be able to move quickly, can recognize and respond to appropriate documentation and is familiar with market requirements and requests. If your attorney takes 2 weeks to review each document, the transaction is going to take a long time. A good advisor takes 3-5 business days on their first turn of the doc and then can respond within 24-48 hours for subsequent iterations.
- Fair terms for both sides. A transaction needs to be a win-win. If one side is getting all the benefit and the other is never willing to give on anything, the transaction will stall. Consider the points that are most important to you and focus on pushing for those items, while giving in on other facets that don’t matter as much. For example, if you feel very strongly about the term of your non-compete, but not as strongly on specific geographic restrictions, find ways to give and take so both sides get a win.
Your likelihood of a successful transaction increases if you keep a steady pace. If a transaction “sits” for too long, the chances of a deal falling apart go up dramatically. To ensure a successful transaction, make sure you’re ready to go from the start with a great team who can move quickly through all facets of the process.
For more information on why time kills deals – check out "Time is a Deal Killer".