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Expiry of Exclusivity Period

In our April 11, 2023 Deal Note®, Ryan Kirby wrote “while most Letters of Intent have a stated exclusivity period of 60-90 days for buyer due diligence, many run well beyond the initial 60-90 days, for reasons that we will explain in another Deal Note®. In today’s Deal Note®, we discuss the reasons.

Over the past 22 years, approximately 30% of our client’s deals have gone beyond the exclusivity period they originally agreed with the buyer.  Time and again we have seen two key reasons for these delays:

  1. The buyer believed there were no other credible buyers willing to step into the sale process.
  2. The seller’s internal deal team was unable to provide responses to buyer due diligence requests in an accurate and timely manner.

Far less often, we have seen three issues-related reasons for delays:

  1. Third-party consents
  2. Purchase agreement negotiations
  3. Compliance matters  (i.e. DFARS, FAA, OSHA, ERISA, EPA, etc.)

To ensure that your sale process moves forward with good speed, and closes within the agreed exclusivity period, it is critical that: i)  your internal deal team is well prepared for the due diligence process and ii) throughout the sale process you have a number of credible buyers interested in acquiring your company.

Have a great day everyone,

Bill Alderman