Sellers not providing anything
September 22, 2023
by a searcher from University of South Carolina - Darla Moore School of Business in Charleston, SC, USA
I've gotten a few deals under LOI the last 6 months and moved into due diligence. What I've found is that some sellers are incredibly slow/bad about providing any of the due diligence documents and answering questions. I typically start off by giving them an easy list of documents needed, and they take weeks to get anything back to me. I call and write to check in every 2-3 days and get very little.
On one deal now, I am 1-month in due dil and have barely gotten anything.
How common of an experience is this among searchers? I am wondering if I'm doing anything wrong; and why they might be so slow to provide anything.
in Toronto, ON, Canada
A good LOI would stipulate that the exclusivity period only begins once you have received all of the requested due diligence documents. You should always have one way break up fee in every LOI you submit to cover the cost of due diligence, your time and resources . I find that people move a lot faster when they have something to loose. In my experience if a seller is not providing you with the requested documents during the due diligence period they are either unmotivated to sell, having buyers recourse or are having a difficult time providing answers to the questions.
Regardless of the reason it is important to clearly define the expectations of both parties prior to entering into an LOI. I would schedule a meeting with your accounting firm, law firm and Board members to get their opinion on this. I would then set a meeting with the seller and their representatives in order to get to the bottom of why it is taking so long to furnish the requested documents. It could be a simple misunderstanding of the due diligence questions. You won’t know until you set up a call to discuss this.
from University of Missouri in Kansas City, MO, USA