Due Diligence Process Timeline

searcher profile

February 15, 2024

by a searcher in United Kingdom

Hi all,

Would like to ask what a typical due diligence timeframe would look like in terms of time scales for a company with revenue of 10m & 50 employees. is this done all at one time or is it split into segments over a few months?

0
51
330
Replies
51
commentor profile
Reply by an investor
from University of Canberra in Perth WA 6000, Australia
The short answer is "that depends..." Fastest ever I expereinced was 4 hours when my accountant was able to deep dive into the detailed (ie non-broker prepared) accounts that were (eventually) supplied. He found major fraudulant accounting practices hiding stuff that killed the deal pretty quickly.

The typical process here in Australia is tending to take 2-4 months. One of the biggest factors is the sophistication of the seller. Many havent heard of a 'data room' let alone know what should be in one! But that is the trade off because it is that very lack of sophistication that attracts a searcher to the buisness as it provides for 'quick wins' once acquired. So the fact that it may take 6+ weeks to get all the financial details together (and sometimes longer to get the legal and other technical DD data you may need), will lenghten the process.

Whilst this can be frustrating, the prudent searcher will consider it as a 'fact find' into what they can do once behind the desk. The other thing to do here is use that time to build the relatiohships deeper with the owner. We find you will need that during this period - especially if there are tough conversations about variances, valuation expectation shifts etc.

Another aspect is how you have briefed your DD service providers. Really important to provide a tight fitting brief so that you dont find yourself with a huge bill at the end for more work than is potentially required to make a decision.

Project manage the process with a simple gantt chart and share these expectations with your providers and the seller to ensure expectations are aligned and that you can effectively manage the time or scope creep that may happen.
commentor profile
Reply by a searcher
in Washington, D.C., DC, USA
Simple answer is: It all depends on the existing systems and processes of your potential seller. In my experience of a Tech-Acquisition, timelines involved performing DD on business/finance, marketing/growth/sales, and most important the tech/product engineering. If I’ve to give it a percentage, I’d say: business/finance###-###-#### %), marketing/growth/sales(10-20%) and tech/product engineering(60-50%). Also, the driving factor, is What do you want to do next with your new acquisition and what is your next 3-5 years strategy. For example: If you’re thinking about exiting the entire existing team, you may want to do dig deeper and understand the pro’s con’s and dependability factor. Here you DD should be focused on understanding each and every minute details as much as possible. If you are thinking about growing and retaining current talent and business, you may look for a fair assessment, and understanding tech/product that will attract immediate investments or fixes! This will help you taking better and more informed decision. In terms of timeline, for Series A-B size co. it took us 3 months of timeline (mostly as I said was on Tech/Product).
commentor profile
+49 more replies.
Join the discussion