How long is the due diligence period in dealmaking?

Before a substantial transaction, a real estate purchase, a considerable investment, or a merger or acquisition, there’s a certain period known as due diligence. This is when the buyer checks the target company, property, or other assets subject to sale.

Downplaying this critical process with any misinterpretation or mishandling assumes severe stress, missed deadlines, and failed deals: 

• The confusion over the due diligence timelines is a common pain in the neck for both buyers and sellers. 
• Uncertainty creates stress and can lead to misunderstandings, especially regarding potential delays in the due diligence process affecting the final closing period date.
• Improperly aligned timeframes cause friction and put successful deal closure at risk. 

For a desired outcome, learn more about due diligence duration, factors affecting it, and the way to keep due diligence on track.

Here’s a comprehensive overview of:

• How long does due diligence take?
• Why does due diligence take so long? 
• When is the due diligence extended?

What is the due diligence period?

The due diligence period involves a specific time frame in a purchase agreement when the buyer reviews and assesses the target company before closing the deal. The due diligence timeline varies across industries and transaction types.

A complete audit of the target company’s financial records, legal contracts, operational procedures, and intellectual property takes place before the actual acquisition. 

Real estate inspection periods, appraisals, and examinations of property titles and liens, as well as neighborhood assessments, are all included in real estate transactions.

The buyer due diligence aims to equip the buy-side with all the information to make informed decisions. Following the average due diligence period, the buyer may withdraw from the transaction without incurring any penalties.

How long is a typical due diligence period?

A typical due diligence period lasts 30 to 60 days, but can vary from a few weeks to several months or more, depending on the complexity of the transaction, company size, and industry

• Smaller acquisitions. When the business model is simple and financials are straightforward, 30 days is often enough
• Mid-market transactions. Usually fall into the 45–60 day range, giving buyers time to assess financial statements, contracts, customer relationships, and operational risks
• Large-scale mergers and acquisitions, private equity deals, or cross-border transactions. Often require 90 days or longer due to the volume of documents, multiple regulatory reviews, and cross-jurisdictional coordination

In practice, the length of a due diligence review is shaped by the type of deal. For example, venture capital investments may involve a shorter, focused process, while leveraged buyouts or strategic acquisitions typically demand a deeper and lengthier review.

One of the most often asked questions in the real estate industry is, “How long is the due diligence period for a residential real estate transaction?” When it comes to the acquisition of a house in the United States, the typical length of due diligence ranges from seven to fourteen days.

During this time, the buyer inspects the house and area. If the target property is a historical residence, a foreclosure, or needs an in-depth inspection, a normal due diligence period may be extended to thirty days or more.

Due diligence in commercial real estate typically takes 30 to 60 days. That’s because the property as such and the nature of the transaction are far more complex. The buyer’s opportunity is in securing a sufficient amount of time to examine the nuances associated with the target property: 

• Leases
• Environmental reports
• Zoning restrictions
• Financial accounts

Due diligence in acquisitions is the longest. 

Typical M&A due diligence time may range from thirty to forty-five days for a small company purchase, but it may take anywhere from sixty to one hundred and twenty days or even longer for major corporate M&As. 

Our M&A due diligence report indicates that parties should analyze vast amounts of information: 

• Financial accounts
• Tax returns
• Operational contracts
• Client lists
• Staff agreements

Most importantly, the due diligence clause duration is not arbitrary. Rather, it is a time frame established to provide the buyer with a fair amount of time to finish their inquiry.

Deal timeline from LOI to closing

Stage	Description	Key Activities	Duration
Letter of Intent (LOI)	A non-binding agreement that outlines the key terms of the potential deal and signifies a mutual interest.	1. Buyer and seller agree on the key terms (purchase price, structure, conditions) 2. The buyer and seller sign the LOI.	1-2 weeks (or less)
Due Diligence	Involves the buyer’s investigation and verification of the target company.	1. The buyer’s team reviews documents and interviews key personnel  2. The buyer confirms all representations made by the seller  3. The buyer chooses to terminate the deal based on findings.	Varies from 30 to 90 days
Definitive agreement	A legally binding contract that details the final terms and conditions of the transaction.	1. Lawyers draft and negotiate the final purchase agreement 2. The parties review and approve the final contract.	2-4 weeks (often overlaps with due diligence)
Closing conditions	Ownership transfer and deal completion.	1. All conditions precedent are met 2. Final documents are signed and exchanged 3. Funds are transferred to the seller 4. Ownership is legally transferred to the buyer.

Here is an example of M&A transaction stages:

The timeline for each merger due diligence stage significantly varies depending on the deal’s size and complexity, as well as regulatory requirements and market conditions:

• Strategy & target identification.
• Valuation & due diligence.
• Negotiation & structuring.
• Closing & financing.
• Post-merger integration.

Factors that influence how long due diligence takes

The due diligence duration is not predetermined at all:

1. The time required for the due diligence procedure will expand depending on the number of assets, contracts, and legal entities involved.
2. The deal schedule directly depends on how fast the seller completes all the required paperwork and supplies the essential information. 
3. The due diligence time shortens once the seller is well organized and offers a comprehensive data room for due diligence as a safe repository of documents before the due diligence commencement.
4. Due diligence involves third-party consultants, inspectors, appraisers, environmental consultants, and legal counsel unaffiliated with the target company. The participation of these core third parties often extends the due diligence period.
5. Parties should satisfy special conditions and contingencies within the agreed-upon due diligence timeframe. 
6. The legal foundation for due diligence may vary based on state, while some transactions may be subject to standard due diligence timeframes in particular jurisdictions or regions.

How long is due diligence period in real estate? 

Due diligence timeframes in real estate vary significantly depending on the state/jurisdiction, local market customs, and the specific terms of the purchase contract. 

For example, in California:

Standard contract form: The California Association of REALTORS® (C.A.R.) Residential Purchase Agreement is widely used.

Due diligence contingency period: A common timeline for contingencies (loan approval, inspections, appraisal) is 17 days from the date of contract acceptance.

Deadline: There’s often a three-day window for the buyer to deposit earnest money into escrow. A final walkthrough is typically scheduled within five days of closing.

When does due diligence start? 

The starting point for the due diligence period is the effective date of the contract, which is the day when the purchase agreement is signed and executed entirely by all of the parties involved. This formalizes the commencement of the investigation procedure.

Can the due diligence period be extended?

Yes, the due diligence period can be extended if both parties agree or if unexpected issues arise that require more time to complete the review.

This might be the result of unforeseen circumstances during the first assessment, like third-party delays or a late seller’s response to submitting additional paperwork during the private equity due diligence period.

Here are some examples of complex transactions when the due diligence process needs an extension: 

• When companies buy or merge, they require additional time to deal with problems like finding hidden debts, dealing with regulatory challenges, settling complicated intellectual property conflicts, or dealing with big personnel problems. 
• In commercial real estate, the due diligence period expands for additional environmental studies, zoning and regulatory difficulties, or problems found during title search or property inspection.

Due diligence extensions allow parties extra time to:

• Look at how a firm works
• Evaluate its claims about the industry and technology
• Perform better anti-money laundering checks
• Complete full audits and necessary inspections of the supply chain for private equity investments.

Nevertheless, the extension is not always the case. The parties should initially agree on possible contract amendments. The purchaser formally requests the extension in writing, detailing the grounds for the request as well as the new end date that they would want to see implemented. 

Despite the seller is not required to grant the extension, they often do so if they consider the purchaser’s request as appropriate and are certain that the transaction will proceed. 

When the buyer withdraws from the transaction and the seller is forced to begin the process all over again with a new party, it is better for the latter if the buyer allows for a certain due diligence extension.

A non-refundable earnest money deposit is an example of the extra consideration that the buyer could provide in return for the extension of the contract under certain circumstances. Then, the buyer is genuinely committed to the deal and does not try to defer the process through the extension.

The reasons for extension should be documented in writing and signed by both parties to identify potential legal problems.

If you are a new business entity, check out our startup due diligence checklist.

How to keep due diligence on track

The final question is about how to ensure that the due diligence process is carried out correctly.

The parties are interested in securing an effective and well-managed due diligence process. While any delays are both expensive and burdensome, the parties should follow due diligence best practices:

Recommendations to the buyer:

1. To get well-prepared and avoid any delays in the scheduling process, engage third-party experts (a real estate agent, an inspector, a lawyer, and an accountant) before making an offer.
2. List all the items subject to due diligence examination. Once the contract is signed, proceed with the most important aspects, like household inspection or financial audit.
3. Ensure open and transparent communication with the vendor. In case of any problems or delays, contact them as soon as possible.
4. When requesting information or papers from the seller, make sure that you are as clear and specific as possible. Unclear requests will result in misunderstandings and halt the due diligence process.
5. Take note of the due dates. Maintain a keen awareness of the date when the due diligence expires and actions you should take before that date.

Recommendations to the seller:

1. Before listing your property or company, collect and organize all of the papers pertinent to the future transaction. By using a well-arranged virtual data room that contains financial accounts, contracts, permits, and other important papers, you’ll secure an efficient data room timeline.
2. Respond to all the buyer’s requests promptly and comprehensively
3. Disclose any other concerns or potential problems. By concealing facts that the buyer will spot in the future, you’ll undermine their deal confidence and cause the transaction to fail.
4. Appoint a person in charge to handle all conversations and document requests to ensure that all the appropriate information is supplied duly.

Key takeaways

The due diligence timeline is essential for every significant deal. Although there is no universally applicable response to the question about the actual length of the due diligence period, dealmakers should understand the variety of factors affecting the schedule and due diligence extensions.

Our clients often ask us about how long due diligence lasts.

While the due diligence for a residential real estate transaction may last between seven and fourteen days, the due diligence for commercial real estate and company purchases may take anywhere from thirty to one hundred and twenty days or even longer.

Transaction complexity and the availability of required information predetermine the length of the due diligence.

To keep the due diligence process in the right direction, both the sell-side and the buy-side should be proactive, organised, and committed to transparent communication. The due diligence team lineup, preparation of all the required papers in advance, and following the set deadlines are all equally important.

Provided that the parties approach the due diligence procedures with honesty, preparedness, and a dedication to clear communication, the process will run smoothly until the sale closes.

Category

Due diligence