I've been in due diligence with a buyer for almost four months now. It started as a 60-day exclusive, but every week they come back with another request. First it was three years of financials, then customer contracts, now they want to interview my top ten clients. I'm a small manufacturing shop, not a public company. At what point do you tell them to fish or cut bait? I'm worried if I push too hard they'll walk, but I'm also losing deals with other interested parties because I'm locked up. Anyone been through this?
Selling
When should you cut off due diligence and force a decision?
Four months is way too long. What does your LOI say about the exclusivity period? If it expired, you're free to talk to others. I'd send a written notice that the exclusivity is over and they have X days to deliver a final offer or you're moving on.
We went through something similar on our first sale attempt. The buyer kept asking for more and more, and it turned out their financing was falling apart. They were stalling. Not saying that's your situation, but the endless requests can be a red flag ngl.
Client interviews are pretty normal for a business your size, but only after a final LOI is signed. If they're asking before that, it's backwards. I'd push back on that specifically.
Four months. No.
Also, who is your attorney? Your M&A lawyer should be managing the timeline, not you. If they aren't, get a new one.
I sold my distribution company two years ago. We gave the buyer 90 days exclusive. At day 75 they still hadn't finished, so we sent a letter saying exclusivity ends in 15 days unless they produce a signed purchase agreement. They scrambled and got it done. Sometimes the deadline is what actually makes them move.
Did you have other buyers waiting, though? That's the part I'd worry about. If you burn this one and nobody else is at the table, you're back to square one.
We had one other party that had expressed interest but wasn't serious. Honestly, the threat was enough. But I won't pretend it wasn't a gamble.
The interviews are the thing that would bother me. If they want to talk to your customers, that means they're either getting serious or tthey're doing free consulting. Hard to tell which. I'd ask them point blank what the remaining open items are and when they expect to close.
Fair points. The exclusivity expired at day 60 and I never formally extended it, so technically I'm free. I just didn't want to spook them. My attorney has been pretty passive about it, which is part of why I'm asking here.
Passive attorney is almost worse than a slow buyer.
Then stop waiting.Send a short email today: exclusivity expired on X date, we are not extending it, and we need a definitive answer by Friday or were reopening discussions with other parties. Keep it professional. If they're real, they'll respond. If not, you've lost nothing but time you were already losing.
And if they do walk, that tells you something too. A buyer who bolts the second you ask for a timeline was never going to close anyway.