How Long Should Your Deal Take to Close?

If you're a founder contemplating a sale or in process of selling your company, you might wonder how long your deal should take to close...the answer is more complicated than you might think, and speed (or lack of it) can have implications for buyers and sellers.

Understanding the Timeline for Closing a Business Sale: Insights for Founders

As a founder, deciding to sell your company can be a daunting task. Once the decision is made, one of the questions that might come to mind is, how long should this deal take to close? While we can't provide a straightforward answer, we can share some of our own experience as a guide. The duration of a deal depends on various things, like the complexity of the transaction (type of sale, structure etc.), the size of your organization, and the industry you're in. The process can take anywhere from a few months to over a year to complete.

Due Diligence

The due diligence process is one of the main reasons why the deal may take longer to close. During this process, the buyer will conduct a thorough review of the company's financial, legal, and operational documents. Depending on the size of the business, this can take anywhere from several weeks up to months. Exclusivity for this period typically ranges from 60-90 days but can go as long as 120 days depending on the terms agreed to on both sides.

Negotiation Process

Another factor that may impact the duration of the deal is the negotiation process. This usually happens prior to due diligence, when the LOI is being redlined back and forth. Both the buyer and seller need to negotiate the terms and conditions of the sale, which can be time-consuming. If there are multiple bidders submitting IOIs or LOIs, the process can get even more complicated, leading to longer negotiations. However, having a good transaction advisor involved will likely save you time and headaches along the way.

Speed (or lack there of it)

A fast deal may be appealing, but it may not give the parties involved enough time to conduct proper due diligence or negotiate the best possible terms. On the other hand, a drawn-out process may lead to uncertainty, causing buyers to lose interest in the deal or causing the seller to get cold feet. Again, this is why having a great team of advisors is vital to your outcome.

All in all, there is no single answer to how long a deal should take to close. That said, the duration depends on the deal terms, exclusivity period, and how long it takes to complete due diligence. As a seller, remember that it is essential to understand that speed is not always the best option. A well-negotiated deal that offers the best possible terms may take longer to close, but it's well worth the wait.