Due diligence is considered as something more than an attempt made by a buyer to authenticate the worthiness as stated to the buyer by the seller.
It is stated as something more than just this. If considered in a broader aspect, due diligence is considered as a model for a buyer to become comfortable with the marketing, operations as well as finance related to the project or business in a way that makes it easy for the buyer to easily understand the whole scenario both from outside and inside.
What is the time duration for due diligence in case of acquisition or merger?
Naturally, buyers want the due diligence to continue for a time span humanly possible, whereas sellers prefer getting due diligence done rapidly. If you look at the arguments offered by both sides, it does make sense. Quicker due diligence for the sellers can be put to use as a mode to complicate or hide the real-time business issues from the buyer.
Similarly, protracted and slow due diligence by a buyer can be considered as a technique to find more flaws and also screw up the valuation of the company.
Hence, Due diligence is considered sane if it is carried out for that time span as required by the buyer to get all requested information or items from the seller. Elongation of the process ends up complicating the deal for the seller unnecessarily. Typically there is a saying that time is responsible for killing all the deals, including the good ones, as time has never been anyone’s friend in making deals. Sellers should be made aware of the duration of the due diligence so as to grab a good deal.
Sellers prefer it short as Buyers look for longer ones
Reasonable due diligence timelines are important, especially for that type of deal where say a buyer has managed to win an auction and is, in turn, looking ahead to pay a premium potentially. Many of the bidders may offer their final and best offer on a certain business only to conclude in due diligence upon finding something inevitably that probably concluded some transgression internally. Curtailed due diligence will not be accepted by any buyer but if a seller is asking for a premium, then you can expect to go through an exhaustive span of due diligence.
However, in case the seller is prepared reasonably besides the buyer being experienced, then the expected span of due diligence should not be more than 30 days to 90 days. In case the seller is unorganized along with the buyer being inexperienced and failing to co-ordinate, this span of due diligence can be more than 90 to 180 days. But this span is also affected by the company size as a whole. You can save a lot of time on the due diligence process if you hire assistance from someone who knows the art of managing this kind of thing and will, in turn, assure you of a short due diligence period.
In case you are thinking of selling or buying a firm and have a lot of questions with respect to due diligence and its process, feel free to get in touch with us to discuss more on the objectives and goals, along with the tools that can be used for your purpose.