Navigating through a transaction; what’s the ETA?
Despite the current economic conditions, the level of transaction activity remains strong. Knight Corporate Finance has been closing deals throughout lockdown, but analysis on latest deals does show that the time taken to complete a process has been affected.
Transactions typically involve a large amount of work upfront, both for the lead advisor and the company involved, therefore it only makes sense to start a process if there is confidence in completing it.
Lead advisors can spend months preparing a business for sale however, it is possible to move far more quickly than this. Knight Transaction Services recommend a dry-run due diligence process which will check that the business is sufficiently ready to make it through the intensity of a transaction.
The Knight Vendor Assist service flags potential deal issues upfront to ensure that these can be mitigated ahead of time and significantly reduces the due diligence timetable later on.
Alongside this, the lead advisor (or business) will prepare the sales or investor documentation that will enable interested parties to make a well-informed formal offer to invest in or acquire a business.
The execution of a deal involves due diligence and legal documentation. Our Knight Corporate Finance colleagues have advised that this takes no less than 10 weeks but lately they have seen that deals take an average of 4 months to complete. We believe that the impact of Covid-19 has not dampened the enthusiasm of investors or acquirers, but they do want to ensure they are mitigating their risks. As a result, we are seeing more time spent in the diligence phase, which is also becoming more extensive.
On average, the last 10 deals undertaken by Knight Corporate Finance took 7.5 months to complete and we estimate this has been extended by around a month compared to deals a few years ago. Our workload shows that the process is split by; 22% preparation, 26% in marketing and 52% executing the agreed deal.
Ultimately, preparation will have the greatest impact on the time take complete a deal. We expect that the minimum time to complete a deal with a full marketing process is 6 months but recommend that you plan for 9 months. A well-prepared business will ensure your deal runs smoothly and reduces the time and effort spent in diligence. It is never too early to start planning and at Knight Corporate Finance and Knight Transaction Services we are here to assist when you need us.