Appropriate duration of Due Diligence
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Duration depends on the type of company (Publicly traded vs private). Prior detailed conversations on how the company is structured and what synergies exist between the two.
I believe the complexity of the transaction is also a factor in the dd timing, particularly as pertains to the age of the asset. We recently sold an asset that was a very old operating mill. With such an asset it was challenging at times to find some of the original contracts that had been signed, land surveys, equipment service logs etc. The info was all available, it just took both sets of lawyers (buyer and seller) longer than usual to find and verify everything.
The approach varies depending on the company’s size, type, locations, among other factors. It is determined on a case-by-case basis
It depends on the size, complexity, of the deal.
If its a small companies, couple of weeks should be sufficient.
If its a multi billion dollar deal, a year or so should be sufficient. However, if due to anti trust issues and it drags beyond 1.5 years, it might not be ideal to drag this deal.
It depends primarily on any self imposed deadline for closing agreed to by the parties. Neither the buyer nor the seller are interested in dragging matters too into the future. Usually what takes more time is loading and updating all relevant documentation up to the data room. After that the seller and the buyer will have a expectancy of the time required for the DD independently of the size of the data room, so the buyer will need to hire the necessary advisors (legal, accounting, etc.) capable of conducting the DD in such mutually agreed time. An extension clause in usually agreed to by both seller and buyer to provide for additional time to conduct the DD process under certain circumstances or as agreed to be mutually agreed by all parties.
I believe it also depends on the risk profiles of the parties involved. A risk averse buyer will likely create a more drawn-out DD process. Similarly, the risk associated with the target, and industry the target operates in, is likely to play a part. Sufficient attention should be given to mapping the initial risks associated with the target, or its industry, to inform factors such as likelihood and severity of potential risks factors. Of course, this picture can develop as more is learnt during DD.
Probab ly it depends on the complexity of the target and on the resoruces (human and financial) you want to deploy. If you have legal, accounting and tax advisors and their full temas, you could probably go faster. Additionally, if all relevant information is digital, probably temas can work more efficiently instead of travelling to the target offices or facilties. In average it could probably take 3-4 months and usually is defined by the target and target´s advisors in order to get the binding offer as soon as possible.
Regards
PedroDepends on the size of the target. If the target is small, the scope of due diligence will be smaller. Certain parts like IP DD, HR DD or property DD can be place aside.
But if the target is big, especially there is a take over, full scope of DD is needed.Of course there are other factors like requesting documents from seller or waiting the seller’s response takes time.
I would agree with all the comments above, but from previous experience, the duration depends on the level of accuracy and complete information that is provided for the due diligence, so the team (employees from both parties, external parties, and others) involved in the process must be compromised to a deadline according to the size of the target, materiality assessment, level of details in each area (Legal, Tax, Finance, HR, among others). Elaborate a timeline with all the subjects to evaluate and an appropriate team are solid basis to complete in a reasonable time.
I think it is totally dependent on the company structure, complexity of the deal, the willingness / openness of the target companies’ employees to participate in the interviews etc..
It definitely depends on the size of the company involved, and how well they organize their data and documentation, and manage their operations.
I think as well it depends on the country and market that the diligence is being conducted in. For example, In the US or other developed market versus an emerging market.
The length of the due diligence process in mergers and acquisitions (M&A) can vary depending on several factors and can range from a few weeks to several months. The typical duration for small to mid-sized businesses is 30 to 60 days, but more complex transactions may take longer, think of an average of two to three months or more.
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