Appropriate duration of Due Diligence
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The appropriate duration of DD depends on the size of the transaction. While companies may be anxious to complete this exercise, it should be approached with caution in order to ensure that no unnecessary risk is absorbed. Failure to conduct a proper DD exercise can result in negative effects later post-merger.
The company culture is another factor that affects the length of the due diligence process, besides the size of the target company and other aspects. If one of the companies is very cautious, they will take more time to decide as they will try to reduce the risks. As a result, the whole period for the due diligence could be two or three times longer than what it usually takes to finish the reasonable due diligence.
Due diligence should take no more than 2 months in my opinion, but I have seen dd’s that have lasted even longer
The duration of due diligence is a delicate balance between thoroughness and timeliness. While it’s essential to conduct a comprehensive investigation, excessive delays can erode deal momentum and increase the risk of termination. Effective due diligence requires careful project management to prioritize critical areas, allocate resources efficiently, and maintain a clear focus on the deal’s strategic objectives.
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