What is the time duration of tasks that buyers outsource for dealmaking?

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by a professional from University of Southern California - Marshall School of Business
in North Palm Beach, FL, USA

2yrs ago

What is the time duration of tasks that buyers outsource for dealmaking?

As a researcher, I’m gathering data on the timeframes involved in buying and selling small and midsize businesses (SMBs), particularly the outsourced tasks.

Objective: To understand the duration of outsourced tasks in SMB transactions. This information can enhance our understanding of the overall dealmaking process and timelines.

Data Needed: The number of calendar days from when you outsourced tasks to when you received the final output (report, decision, funding, etc.).

Why This Matters: This data can help forecast dealmaking durations more accurately. It’s important to note that some of these tasks may occur concurrently.

Your Contribution: Please identify your role (buyer/seller, advisor, lender, etc.) and (hopefully) the purchase/sale price of the completed deal(s).

Survey vs. Anecdotes: Estimates from a larger population of dealmakers are more valuable than anecdotal information from a few individuals.

Invitation to Participate: Everyone involved in the process is encouraged to participate as each role offers a unique perspective.

Outsourced Activities: We’re interested in the completion times for outsourcing the following activities:

• Lawyers (LOI, legal due diligence, sale/purchase contract, etc.)

• Accountants (accounting/adjustments, accounting/financial due diligence, quality of earnings, etc.)

• Lenders (application-to-funding; not just approval)

• Business appraisers (assignment-to-report)

• Industry experts (assignment-to-report)

Additional Activities: Are there other tasks you’ve outsourced (e.g., fundraising from investors)? Please share those as well.

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reply by a professional 2yrs ago
from University of Southern California in North Palm Beach, FL, USA

Excellent insights!!!! (I continually see searchers and sellers tripping over themselves, and each other, because they do not have a realistic heads up about timings and durations. Nor do most know how and when to activate their teams. )

reply by a searcher 2yrs ago
from Princeton University in Annandale, Clinton Township, NJ, USA

Realistically, 90 days for full diligence from LOI to close is the best approach in my experience. Buyers will still need to be “sprinting” and making sure all 3rd parties stay on track to make 90 days work. In the past, need to have all 3rd party vendors selected by signing of LOI.

estimates below:
1) Financial/tax diligence as soon as you sign LOI and get through any remaining business diligence. Credible vendors here should be able to complete in 30 days IF seller provides necessary data (big if!) in timely manner
2) debt/equity financing: ramp up as soon as possible post LOI and once you have marketing deck/business plan written up. This timeline ranges widely, and debt financing likely requires keeping up to date throughout the whole process.
3) insurance diligence: ramp immediately after LOI, typically < 1 month to complete
4) business appraisers: ramp as needed based on bank requirements. These are generally pretty worthless to the buyer (assuming they know how to value companies themselves), but will probably be required by bank
5) lawyers: hire them immediately post-LOI, but they won’t ramp until final 30 days when legal docs get worked out ahead of closing. ***Important caveat: make your LOI as clear as possible on major deal points so you don’t have to renegotiate key terms at the end of the DD period prior to closing