How quickly can you sell or acquire a business? As with most major transactions, it depends. Once parties agree to merge, deals typically take six to 18 months to conclude. The selling company’s size and industry, the complexity of the transaction, and the buyer’s ability to get financing, among other factors, can all affect timing.
Many issues, such as regulatory holdups, are ultimately outside your control. However, good organization can keep your M&A transaction on track and focused on the finish line.
Keep moving
Once deal negotiations begin, buyers and sellers must work together to map out a loose timeframe. Flexibility is essential because you’re unlikely to hit every date, including the closing target. Add in extra time and specific methods of resolution for unexpected events, such as an additional round of due diligence, financing problems and price negotiation stalemates.
To estimate the kinds of issues that might cause out-of-the-ordinary delays, consider the type of deal. Is your M&A a fairly straightforward merger of equals, or is it a more intricate transaction that involves, for example, the sale of divisions to more than one buyer? The more “moving parts,” the longer a deal is likely to take.
Financing can play a big role in deal timing. An all-cash purchase usually is the easiest type of transaction. But there could be delays if the buyer requires debt financing from bank lenders and hasn’t already secured it or is coordinating with the seller to qualify for the loan. Stock sales that require the parties to negotiate a fair exchange rate and deals financed by the seller or via earnouts also generally take longer.
Also, if both parties operate in the same industry and have substantial market shares, the government could initiate an antitrust review — causing major delays, or worse. The Department of Justice’s recent challenge to the Comcast/Time Warner merger, for example, fatally derailed the $45 billion transaction.
These are only a few factors that can knock you off schedule. Depending on the type of business, you may also need to worry about such things as labor union or local government resistance, or serious legal liabilities involving, for example, contaminated property, disputed trademarks or employee discrimination lawsuits.
Slow down
Although it’s important to keep your deal moving forward, you should never try to rush an M&A. This is particularly true for buyers, who need to devote adequate time to due diligence. One overlooked financial problem or legal liability could turn a profitable acquisition into your company’s biggest mistake. What’s more, integration preparation — which includes getting to know key employees and gaining a thorough understanding of such functions as your seller’s accounting methods, IT network and employee benefits — takes time.
If you’re a business owner, be wary of unsolicited “handshake” deals that promise a quick sale. A speedy transaction that doesn’t rely on an army of advisors — particularly when the offering price sounds generous — may be tempting. But if your business hasn’t been professionally valued recently and you haven’t kept up with comparable sales, you could end up with the short end of the stick. Also keep in mind that a sale is about more than price. Deal terms, tax consequences and your current income needs and desire to play a role in the business’s future all contribute to its success.
This is why it’s important to rely on advisors’ expertise and experience. Advisors help ensure that both parties are satisfied with the final price and terms of a deal and don’t leave the negotiation table feeling cheated because they were rushed into an agreement.
Get the details right
Once you establish a rough timeframe for your deal, try to stick to it. But remember that it’s more important to get the details right — even if working through them involves the occasional delay.
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