The Three Keys to Deal Timeline Acceleration

Posted on: August 26th, 2019

Keys to Deal Timeline Acceleration

Deal timelines for middle market transactions often stretch beyond the original closing timeline. Despite everyone’s interest in a quick close, timelines extend for any number of reasons whether a third party delay, a legal delay or a business diligence delay.

Middle market acquisitions usually have a focused seller on one side, seeking to close as soon as possible. Any unforeseen event that materially pushes your closing date out, decreases your certainty of close and puts your deal at risk. Ultimately, time kills deals as it saps the teamwork efficiency and collaborative enthusiasm needed to advance the deal along in the first place.

Lenders get frustrated and rethink the loan-worthiness of the soon-to-be borrower. Sellers get anxious because they want to move forward onto the next chapter. Buyers get frustrated because they don’t always understand the root cause reason for the delay, and have a huge amount of resources invested in the deal going through. They key in avoiding these delays is in understanding the gaps in the deal process where information does not align with expectations, and managing these gaps before the deal even gets underway.

To do this, a company should prioritize organization, preparation and resource bandwidth. When the deal process is designed upon a framework of organization, preparation and bandwidth, timelines can be achieved and quick closings happen. Here the Attract Capital “Three Keys to Deal Timeline Acceleration”:

Organization – Learn the diligence approach of the lender and make sure you have all of the information and materials they will require upfront. Most of the information needed is financial in nature, but you need to have industry, legal and background information as well. Make sure there are no major holes and that the information is fresh and accessible. Assemble a deal team leader to gather and manage the information flow with the lender.
Preparation – dealing with lenders requires learning a new language with respect to content, reporting standards and engagement style. Often CEO’s and business owners are not used to this type of interaction. Bring on an advisor who can help familiarize you with the presentation conventions and content expectations. The more you prepare and understand what the lenders are looking for, the faster your deal will go.
Resource Bandwidth – deals are intense projects that need a coordinated internal team to get through. Design your team with ample resources consisting of project leaders, project supporters and functional specialists. Your team should set the pace and make sure all other deal collaborators are on pace. The larger your resource base, the faster your timeline speed.

In the acquisition financing arena, capital availability is destiny as companies require reliable access to capital to grow over the long term. Unforeseen capital needs usually arise when acquirers least expect it. This can cause some concern for the acquisition financing provider, especially when covenants tighten up and that working capital availability is utilized faster than expected.

Mezzanine debt borrowing is usually a straightforward activity that many companies use for funding of transitional growth. Mezzanine debt lenders are highly transparent about their due diligence approach and their post-closing loan management making it easy for companies to engage with.

Elections have consequences and positive ones at that for the acquisition financing middle market. While much media attention is paid to the direction of the yield curve and the Fed’s likely rate cuts, scant attention is paid to the more important drivers of the acquisition financing market – business psychology and regulatory climate.