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 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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Reply by a lender
from University of Michigan in Indianapolis, IN, USA
It also works well for buyer and seller to have a couple timely calls with the lender along the way so that the seller can hear what the process is and where the buyer is in the process. This type of open communication and access should provide comfort to the seller when the exclusivity period needs to be extended. Similarly, many lenders require their BDOs to visit the business and meet with sellers and buyers.
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