Is a 30 Day Due Diligence Period Possible?

April 13, 2021

by a searcher in Florida, USA

My search fund is bidding against other buyers who are larger and more financially resourced. The seller has told us that our ability to close the deal really fast would be highly competitive. They are suggesting 30 days for due diligence and closing. This is a business valued at $25MM. Has anyone ever done this before? Is it possible? I may need an endless supply of red bull.

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Reply by a searcher

I see Due Diligence and timeframe as the hot topic that brokers like to use as a narrative point to assess how readily available cash is from a buyer. This topic can be split in so many ways BUT. I agree with Alyssa a lot. What I would add is that from my experience the broker already knows that a 30 day DD is very difficult for all the reasons mentioned above (but not impossible, which is beside the reality). The reality is when brokers use this "Sales" narrative of "Oh, we have other bidders who can close quickly, and in order for your bid to be attractive you need to come in with a DD that can close in 30 days and you might have a shot!" To me this is hilarious. This is a tool to play you against yourself and rush you into potentially providing an LOI that doesn't make prudent sense. They are attempting to achieve a few things hypothetically, which may be: 1) Use your LOI as a stalking horse. (In which case you would have wasted your time and effort), 2) The broker desperately needs to produce an LOI to their client before their retainer concludes, 3) The broker and or seller are aware of skeletons and bones one would find in a conventionally timed DD, hence the need for "dumb money" to step in and provide a nice payday, 4) The broker prepared and consulted with this business for sale over the past 2 years and covered all bases with all documentation, filings, management reports, financial reports, extra human resources to assist with due diligence efforts, inventory and equipment valuations are done by reputable companies that a lender would accept, QOE, Independent review or audits already completed and ready to go, etc etc etc. I only know of 1 broker EVER that did this for a company that was actually doing the same revenue ($25M). I tried my best to find some kind of fault so I could be in a better negotiating position and really couldn't. It is extremely rare to come across deals like that and never have I met or come into contact with a broker of this rare caliber. So as I said, not impossible, but very unlikely! If you have this type of deal, you are in between a rock and a hard place but if this is so, get the best LOI out that you can and go for it! Hope that helps. Good luck.

Reply by a searcher
from University of California, Los Angeles in La Jolla, San Diego, CA, USA

30 days is very fast to get the deal done, but it is possible. We just acquired a smaller, 8-figure deal in that time but we'd also looked at the deal last summer, so there wasn't too much changed. Also, ^redacted‌ and ^redacted‌ spook about on their podcast (link below) about a deal that closed late last year very quickly. There were financial incentives to transact before year end.

My first question for you would be why. Are there financial incentives (taxes, credits, debt owed etc.) or other business drivers (another deal he's got, insert thousands of reasons here) that would go away in the short time and which are driving the business owners desire for speed?

Or is it really a "nice to have". If that's the case you can sign an LOI with a very aggressive timeline, and if need be you can extend the term. Most people at that point, for better or worse, are pot committed to the deal based on the sunk costs. And unless you really mess something up, seller isn't going to walk away.

https://bloomvp.buzzsprout.com/###-###-#### /###-###-#### special-ep-viostream-the-story-behind-bloom-venture-partner-s-latest-acquisition-the-full-bloom-1-11

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