The Decay Curve: the hidden cost of slow deals

Once a letter of intent is signed, two clocks start. The first is fixed: statutory review periods set by competition and foreign investment regulators. Neither party can shorten them. The second is controllable: how long diligence, documentation and negotiation take. For most mid-market private deals, the second clock is the one that kills transactions.

Delay is dangerous for a simple reason. The buyer's confidence is highest at signing. Every additional week is a week in which diligence can surface something new, the buyer's financing or board priorities can change, market multiples can move and the seller's own trading can soften. None of those help the seller.

In-depth reviews are uncommon. In fiscal year 2023, US agencies received 1,805 HSR filings, of which 1,735 were eligible for a Second Request, and issued 37 Second Requests, about 2.1% of eligible transactions. For the large majority of filings, the initial waiting period is the whole regulatory clock.

1. 01Data room not readyMissing contracts, unreconciled financials and unanswered diligence questions are the most common source of delay. Every request that takes a week to answer is a week of drift.
2. 02Purchase agreement disputesRounds of redlines on warranties, indemnities, escrow and the working capital peg. These are faster when the headline terms were fixed precisely in the LOI.
3. 03People unavailableFounders running the business while selling it, holidays, and advisers stretched across several deals. A single missing signatory can stall a closing.
4. 04Trading surprisesA weak month during diligence invites the buyer to revisit price. The longer the process, the more months of trading the buyer sees.

We do not publish a percentage drop in completion probability per month because no public dataset measures it for private deals. The zones reflect where we see risk build on live mandates: around the end of the exclusivity window, when the buyer's leverage peaks and the seller's alternatives have gone cold.

1. 01Build the data room before the LOISell-side preparation moves weeks of work to before exclusivity, when it costs the seller nothing in leverage.
2. 02Make the LOI specificFix the working capital peg method, escrow, earnout mechanics and key warranties at LOI stage. Our LOI Value Decoder shows what each term is worth.
3. 03Keep exclusivity short and conditionalSixty days with a defined extension trigger keeps both sides working to a timetable.
4. 04Run a weekly closing callOne owner of the issues list, one call a week, every open point assigned.

Statutory periods are summarised from the governing legislation and regulator guidance and are simplified. Filing thresholds, sector tests and procedural rules change and differ by transaction, so take legal advice on any specific deal. The decay zones are Acquiry process guidance.

• Federal Trade Commission and Department of JusticeHart-Scott-Rodino Annual Report, Fiscal Year 2023.
• UK Competition and Markets AuthorityMergers: guidance on the CMA's jurisdiction and procedure (CMA2).
• UK Cabinet OfficeNational Security and Investment Act 2021: guidance on notification and review periods.
• European CommissionCouncil Regulation (EC) No 139/2004 (EU Merger Regulation).
• Australian Treasury, Foreign Investment Review BoardForeign Acquisitions and Takeovers Act 1975 and FIRB guidance on decision timeframes.
• Competition and Consumer Commission of SingaporeGuidelines on merger procedures.
• US Department of the TreasuryCFIUS review and investigation periods under 50 U.S.C. 4565.