Mark: Justin, as you know, one of the first questions we get from our clients that are embarking on a sale process is, "How long is all of this going to take?" The M&A sale process is typically all-consuming. It's very distracting from a business operational standpoint. From the business operator's standpoint, it's also seemingly chaotic. And there's often, for business exigencies and other reasons, a need for speed. Given that context, what is the realistic timeframe for completing a deal and what are the various work streams that comprise that timeline?
Justin: Yeah, so I think first I'll say every deal is different. Mark, you and I have done deals that have gotten done over a weekend, which is rare, but it does happen. And we've also done deals that have spanned many months, if not years, to get done for various reasons. So not all deals are the same, but I would give you kind of a basic framework, which is probably around 30 to 60 days from the time you sign an LOI, which lines up well with the exclusivity period that you're likely to be subject to in an LOI.
What happens first is you enter into an LOI, which sets forth kind of material key terms between a buyer and a seller. And in that, there will be an exclusivity period where you're prohibited from talking to other parties for that period of time, usually between 30 to 60 days. After you sign the LOI, you're going to work towards getting to a signed purchase agreement. That period takes about 30 to 60 days. And during that period, you're going to be doing sales side diligence, management meetings, working with your advisors, working with employees, getting ready to enter into a definitive agreement.
A third milestone is closing. Sometimes closing can happen at the same time as signing. We call that a concurrent signing close. But often there are third-party consents, approvals, government waiting periods, 280G work streams, a whole host of things that could lead to conditions that need to be satisfied before you can actually close the transaction. So that period between signing and closing can be as short as a week. Often for private companies, it's very short. You just need to get shareholder approval. For public companies, companies that require HSR approval, that could take many months, potentially even more than six months to get close. But from LOI to closing, we generally target around 30 to 60 days.
Mark: So I think as a generalization, targeting 45 days is a good target for completing a deal. It typically takes 60 and that's in the absence of regulatory approvals and other things that could take longer to get to a deal closing.
Justin: Yeah, absolutely. And obviously, if you're a seller, you want to get it done as quickly as possible. Time kills deals. Buyers obviously have an incentive to give themselves as much time as possible so they can do their diligence and find issues, perhaps. But if you're a seller, you want to negotiate that as close to 30 as possible.
Mark: So buckle up for an intense 45 to 60 day period. And our jobs as counselors are to make order out of the chaos and keep you on track.
Justin: That's right.