The short answer is “it depends.” The average transaction that we are taking to market right now takes, on average, seven months to complete. This time to completion has tended to lengthen over the past few years.
As the market requires potential buyers to put very strong offers in front of sellers, the amount of due diligence they do on companies has increased substantially, thereby increasing the amount of time it takes to complete the deal. When buyers aren’t “stretching” on valuation, there is a little more room for the business to have some hiccoughs. When someone is paying top dollar, and probably betting their career in order to do so, they tend to look at every possible issue that may arise. When diligence gets detailed, transactions take longer and more issues can arise. This is one of many areas where having a skilled investment banker at your side can benefit you greatly.
As a seller, you generally want a transaction to go as quickly as possible, so this enhanced due diligence can be frustrating. There are ways you can speed up the process.
- Have the items that a buyer will want to see ready to go. Your investment banker can help you with this because chances are the items they want to see will not be totally obvious to you.
- Make the right people available at the right times. When the buyer wants to come in and perform financial due diligence on your company, it is not a good time for your CFO or controller to go on vacation. As advisors to the selling company, your investment banker can work with the potential buyer and the seller to make sure that the right resources are available at the right times.
- Sometimes, you have to be able to rein buyers in a little bit. Some buyers get incredibly enthusiastic about due diligence. Because of the pressure on buyers to find out every possible thing that could go wrong, they can end up knee deep in information gathering that has no relevance to the transaction. Your investment banker can help you decide what to provide a buyer and when to tell them that they have gotten off-course. Your investment banker can also re-work information you may have already supplied to better answer the buyer’s questions or they may know the answers from previous conversations that they have had with you or your management team.
While the average transaction may take seven months, we have completed some in as little as two months and have worked on others that have taken much longer. In general, we can move as quickly as you need. When planning for your succession or exit, you have to take into account the timeline related to the sale process. All too often we see business owners who make the decision to sell and then immediately want the money in their ATM account. There is still a lot of the race to be run after the decision to sell has been made.