Why M&A deal timelines have stretched by 32% since 2020: New report

A missing staircase once delayed an acquisition that Sabine Schilg was leading. The target company worked in a building that didn’t have a second exit, violating the strict employee safety rules of IBM, where she was VP of M&A integrations.

“The company had to either build a new set of stairs or relocate before we could proceed,” she remembers, now VP of Customer Success at Ideals. “It may have seemed trivial to them, but it was non-negotiable for us because of our due diligence process and compliance standards. And they did it; they built a second staircase before closing.”

A global M&A slowdown

Many factors can add complexity to the due diligence process. From high interest rates and uncertainties around financing to the growing emphasis on environmental, social and governance (ESG) and AI, new challenges are requiring dealmakers to be more meticulous in evaluating potential deals.

This is increasing the risk of delays. Our new research, based on anonymized data from Ideals M&A customers on the sell and buy sides, shows that deals closing in the first half of 2024 had lasted on average 258 days. That’s 32% longer than it did in 2020, when the average duration was 195 days.* 

The number of hours that M&A professionals spend working on deals is also on the rise. In H1 2024, dealmakers spent an average of 191 hours in data rooms per deal, a 35% increase from the previous year (H1 2023) and a 47% increase from H1 2020. The trend peaked in H1 2021, when the average reached 194 hours per deal.

Schilg thinks the lengthening of deal timelines may be driven by high interest rates and uncertainties in financing. “Diligence always takes longer when money is expensive,” she argues. “When there’s a lot of cheap money, the process is easier. But right now, money is more expensive, and post-COVID, businesses often have less financially strong backgrounds. Companies are much more careful in the decision process, focusing on whether there’s a viable business case.”

Early signs of change

Despite this, our data shows there are also early signs that deals might be closing faster. Deals completing in H1 2024 took 5% less time than they did in H1 2023. This corresponds with an uptick in global activity. Separate analysis by PwC shows the value of M&A deals rose by 5% in H1 2024 compared to H1 2023.

It also reflects the observations of Oliver Finch, Founder of early stage investment advisory firm Longmont. “This year has been more overtly, if selectively, risk-on. Last year, there was a tendency to be overly cautious, where teams would pause, slow down, or dig deeper into risk factors,” he says. “This year seems to be returning to a more normalized pace, compared with the frenetic activity of the past three years or so.”

There might not be a quick way to build a staircase – but many other dealmakers will be encouraged to know that the challenges that have stalled their progress in recent years might be starting to abate.  

Methodology

The M&A Deal Trends Report is based on anonymized data collected from our Virtual Data Room customers on the sell and buy sides of M&A deals. We calculated the deal duration as the time between the first non-admin invited and the closure of the room. We also measured the number of hours spent working on documents within the room. 

*Deal duration is classified as time between the first non-admin invited to the Ideals VDR and room closure.