Most transaction delays are traceable to structural questions left open at the outset. A short list of decisions, taken early, materially shortens the path to signing.
Transactions rarely fail because of a single insurmountable issue. More often they slow, lose momentum and eventually lose commercial support because structural questions that should have been settled at the outset were deferred until diligence was already underway. By then, every open question has acquired a constituency and a cost.
In our experience, a short set of decisions taken before diligence begins materially shortens the path from term sheet to signing. None of them requires complete information. They require a view.
What exactly is being acquired
The distinction between a share acquisition and a business or asset acquisition drives almost everything that follows: the diligence scope, the tax position, the consents required, the treatment of employees and the shape of the indemnity package. Where the target holds licences, leases or contracts that are difficult to transfer, an asset structure that looks cleaner on paper can prove considerably slower in practice.
Settling this question early also allows diligence to be scoped proportionately. Buyers frequently pay for a review of matters that are irrelevant to the structure eventually chosen.
Which approvals actually gate closing
Approvals fall into three groups, and treating them identically is a common source of timetable error.
- Approvals that must be obtained before closing, which sit on the critical path and should drive the timetable.
- Approvals or filings that can follow closing, which should not be allowed to delay signing.
- Third-party consents under contracts and leases, which are the least predictable because they depend on counterparties with their own commercial interests.
The third category deserves particular attention. A change-of-control clause in a material customer contract can hand a counterparty leverage that has nothing to do with the transaction and everything to do with renegotiating its own terms.
How risk will be allocated in principle
Parties often defer the indemnity discussion on the basis that diligence will reveal what needs to be covered. This inverts the sequence. An agreed position on materiality thresholds, the treatment of known versus unknown risks, and whether a retention or escrow will be used gives the diligence exercise a purpose. Findings can then be reported by reference to their consequence rather than as an undifferentiated list.
Diligence is most useful when the parties already know what they intend to do with what it finds.
Who holds the pen, and on what timetable
Documentation responsibility and a realistic timetable should be agreed alongside the commercial terms. A timetable built backwards from a desired closing date, without reference to the approvals actually required, creates pressure without creating progress and tends to produce documentation that is negotiated twice.
A practical checkpoint
Before instructing diligence, parties should be able to answer four questions in a paragraph each: what is being acquired, what gates closing, how unknown risk will be shared, and when the parties intend to sign. Where any answer is unavailable, that is itself the most useful finding available at that stage.
This article discusses general commercial and legal considerations. It is not legal advice, and specific transactions should be assessed on their own facts.
