To answer the question, how long does it take to do due diligence – it depends. A buyer in their letter of intent will specify a period of due diligence. And each letter of intent will have a different timeframe for conducting due diligence. And on the other hand some won’t put a timeframe on this crucial task.

We can’t stress enough how important it is to put a deadline for the due diligence phase. In addition, it is also a great idea for the seller of the business to have an out clause inside the due diligence phase. We have heard horror stories that there was no timeframe defined in the letter of intent. And in result the due diligence went on for 6-9 months or even multiple years. On the other hand if there was no out clause. The seller is stuck with that one party while the business is on the shelf and cannot entertain other ready willing and able buyers.

Think about this; business financials change over time, by the end of this lengthy process as I just discussed. Do you think the seller will benefit positively or negatively? Contact us and we will give you examples of how this can impact your valuation or selling price.

So now that we have discussed how important it is to have timeframes and an out clause in the letter of intent, let’s talk about how long does or in our words should it take to conduct due diligence. We have seen due diligence as much as 90 days, which in our opinion is way too long.

Yes, if it is a complex deal with a lot of moving parts then it’s understandable to have that type of timeframe. At GillAgency provide 30 days of due diligence, and a max of 45 days. We set the level expectations with our client and the acquirer from the onset of the due diligence that the information requested needs to flow diligently and on time.
Conclusion

We setup a data room so nothing is being lost in emails. We keep on top of both parties to either facilitate or iron out any kinks that comes along the way. Our success rate in conducting the due diligence within the timeframe of either 30-45 days is 99%. And we are very proud of that.