What is the average exclusivity period to complete diligence and negotiate a purchase agreement?

searcher profile

August 01, 2024

by a searcher in Chicago, IL, USA

What is the average duration of the exclusivity period to complete diligence and negotiate a purchase agreement? Is it typically structured as one term or with milestone based extensions (i.e., must show progress toward securing financing, completing commercial and financial diligence, negotiating a purchase agreement, etc. to extend exclusivity for another term)?

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commentor profile
Reply by an intermediary
from The Johns Hopkins University in Gainesville, FL, USA
45-60 days is the most common, and extensions for financing should be expected. I recommend that Buyers include a due diligence timeline in their LOI, attach a checklist of the items they need to perform DD, and make it clear that the timeline starts when all items have been received. The timeline should include regular meetings between Buyer and Seller to cover items that need to be discussed in person. I have in the past advised a Seller to pull out of a deal when the Buyer-proposed timeline was ignored, as it was clear that my Seller was not top-of-mind for the Buyer.
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Reply by a professional
from University of California, Berkeley in Sacramento, CA, USA
As a Fractional CFO, I've seen deals close in 60 days, I've also seen deals take 9 months. The biggest risk in this process is that your exclusivity expires and they go with someone else, after having spending so much money on diligence. You should ask for as long as possible, even like 120 days, and state that both your goals are to close ASAP, but reality gets in the way. This is just an additional measure of protection in case you want to go on holiday or something comes up in your business that takes more of your time.
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