One of the most frequent questions I get is how long an M&A transaction takes from start to finish. Here is some guidance on timing of transactions.
When working with a firm that knows they want to find a buyer, six months is the amount of time it takes, broken down as follows:
· Month 1: Prepare to go to market and begin arranging meetings with potential buyers.
· Months 2-3: Continue meetings and relationship building with potential buyers.
· End of Month 3: Have a letter of intent with all the terms and conditions in hand from one or multiple buyers.
· Months 4-6: Complete the diligence process, negotiate all final purchase and employment agreements.
· End of Month 6: Close the deal.
While the process may differ by a few weeks here and there, this timing is remarkably consistent. Once the letter of intent (sometimes called a term sheet) is signed by both parties, three months is needed to ensure a smooth close. When attempting to go faster, mistakes can get made or there can be excessive stress at the end of the deal. If things move more quickly, the deal can be signed early and the only thing that happens on the day if close is the wiring of proceeds.