Is the M&A Due Diligence Process Getting Longer and More Complex? | Conclave Partners
Why this question matters now
Due diligence has always mattered in M&A. What has changed is how directly it now shapes timing, price, structure, and closing certainty. In many deals, the real transaction risk is no longer confined to valuation at the LOI stage. It sits in the diligence process that follows, where financial quality, technology resilience, compliance exposure, workforce issues, and operational fragility all get tested at once.
McKinsey’s recent work supports the idea that deal processes are stretching. From 2005 through 2024, the median time between signing and closing rose to about 6.4 months, roughly 25 percent higher than 20 years earlier, and the share of deals taking more than a year to close rose from about 1 in 20 to nearly 1 in 6. McKinsey also points to regulatory scrutiny as a primary cause, noting that lengthy U.S. and European regulatory reviews increased 50 percent from 2017 to 2022.
That broader backdrop matters for smaller deals too, even if the public data set is thinner. Conclave Partners should frame the question carefully: the market has better evidence on sign-to-close and LOI-to-close timing than on diligence-only duration, but both the timing data and the widening scope of review point in the same direction. The process is becoming harder to compress, especially when buyers want more certainty before they commit.
Is due diligence actually taking longer?
The short answer is yes, but with an important nuance. Public sources often measure the full period from signing to closing, or LOI to closing, rather than isolating diligence as a single block. That means the cleanest conclusion is not that every individual diligence workstream has lengthened equally. It is that transactions are taking longer to get through diligence, regulatory review, and final confirmation.
For lower-middle-market private transactions, the IBBA and M&A Source Market Pulse provides a useful real-world indicator. In its Q1 2025 executive summary, it reported that Main Street businesses were generally taking 6 to 10 months to sell, while the $5 million to $50 million segment saw an 11-month average time to close. More notably, the due-diligence period in that $5 million to $50 million segment reached a 5.5-month average from LOI to close, described in the report as the longest ever recorded in roughly 13 years of Market Pulse history.
That does not mean every deal is slowing for the same reason. In some cases the driver is regulatory review. In others it is buyer caution, delayed financial reporting, expanded specialist review, or a seller that enters the market before the data room is really ready. But the practical takeaway is the same: if a seller still thinks due diligence is a quick confirmatory exercise, that view is outdated.
Why due diligence has become more complex
The second part of the headline question is easier to answer than the first. The process has become more complex because diligence is no longer limited to financial, tax, and legal review. EY now presents M&A due diligence as a cross-functional stack including financial, tax, commercial, operational, human resources, AI, IT, product and technology, sustainability, cyber, and transaction tax diligence. That alone tells you something important about the current environment: the checklist is no longer controlled by one adviser or one workstream.
Conclave Partners should also be explicit that not all complexity comes from buyer behavior. Some of it comes from the external environment. PwC describes a “complex, fast-changing regulatory environment” shaped by new due-diligence and transparency requirements, including legislation tied to value-chain oversight, sustainability, forced labor, and reporting obligations. Those requirements increase the amount of data companies must collect, review, and evidence, especially where risks sit beyond the four walls of the target company.
Cyber and technology are good examples of the change. EY states that cyber diligence is now critical for buyers because of the current threat landscape and increasing regulatory requirements, and its product-and-technology due-diligence materials focus on issues like scalability, cloud migration, R&D capability, and integration readiness. Deloitte likewise notes that identifying and managing cyber exposure before closing is becoming increasingly relevant as acquirers try to protect value.
AI is another sign that the diligence process has widened. EY now treats AI due diligence as a distinct workstream, assessing not only how a target uses AI today but also whether it is positioned to respond to AI-driven disruption in the market, product, R&D, and operations. That is a very different diligence universe from the one many owner-led companies still imagine when they hear the phrase “buyer questions.”
What is actually slowing deals down
Longer processes are rarely caused by one dramatic problem. More often, deals slow down because several ordinary problems accumulate at once.
The first is poor seller preparation. If the historical numbers are messy, forecasts are unsupported, accounting policies are inconsistent, or operating data is scattered across systems, buyers naturally ask more questions. EY’s buy-side framework emphasizes run-rate profitability, normalization adjustments, forecast assumptions, working-capital needs, debt-like items, and atypical transactions. Each of those areas becomes a delay point if the seller has not prepared a coherent answer in advance.
The second is regulatory and compliance burden. McKinsey points to regulatory review as a major reason for longer timelines, and PwC’s due-diligence analysis shows why that burden is not limited to antitrust. Companies now face broader obligations around transparency, value-chain diligence, stakeholder impacts, and evidence of risk mitigation. Even where those rules do not stop a transaction outright, they increase review demands and documentation load.
The third is specialization. Once diligence expands into cyber, AI, workforce, sustainability, product, and operational review, coordination becomes a deal risk in its own right. Multiple advisers request information in different formats, management answers the same question several times, and the finance team becomes a bottleneck for work that is not purely financial. EY’s own service taxonomy reflects that expansion.
The fourth is fragmented ownership inside the seller organization. In founder-led and mid-sized businesses, diligence often depends on a very small number of people who are still running the company while also responding to requests. If nobody clearly owns contracts, HR files, product documentation, customer concentration analysis, security controls, and tax exposures, the data room fills slowly and the Q&A process drags. Public datasets do not quantify that problem neatly, but it is consistent with the lower-middle-market timing stretch reported by the IBBA and M&A Source.
How longer diligence affects valuation, structure, and closing risk
Longer diligence is not just an annoyance. It changes economics.
EY’s due-diligence framework ties the work directly to valuation and negotiation. Its financial due-diligence materials explicitly refer to normalized earnings, working-capital needs, debt-like items, atypical transactions, and financial exposures that may affect price or negotiation terms. It also notes that SPA advisory can translate diligence findings into pricing mechanisms, working-capital targets, locked-box versus completion-account choices, and post-sign protections.
In practice, that means a longer process creates more opportunities for a retrade. If buyer review reveals weaker earnings quality, higher working-capital requirements, unresolved tax exposures, larger technology remediation costs, or compliance gaps, the buyer may not only adjust price. It may also push for more cash retention, different indemnity mechanics, more restrictive covenants, or a different purchase-price mechanism.
Timing itself can also shift negotiating leverage. A seller that reaches exclusivity with weak preparation may become progressively more exposed as management time gets consumed and market alternatives fade. A buyer, by contrast, gains leverage each time diligence uncovers a new issue that should have been surfaced earlier. That does not mean buyers always win these arguments. It means delay makes the economic stakes of diligence higher.
What buyers should do differently
Buyers do not solve this problem by asking fewer questions. They solve it by asking more disciplined questions.
First, the diligence scope should follow the investment thesis. If the deal is being priced on growth, recurring revenue, and product scalability, then commercial, product, and technology diligence cannot be treated as secondary. If the target is people-intensive or compliance-heavy, then HR, tax, and regulatory diligence deserve more weight. EY’s framework supports that view by mapping different workstreams to different categories of value and risk.
Second, buyers need to separate must-have diligence from nice-to-have diligence. A process becomes inefficient when every possible question is treated as equally urgent. That is especially true in small and mid-sized deals, where management bandwidth is limited and buyer overreach can generate noise without improving conviction. The goal is not minimal diligence. It is thesis-led diligence.
Third, buyers should connect diligence to post-close execution before the SPA is finalized. EY explicitly notes that diligence insights need to flow into pricing mechanisms, working-capital targets, and post-sign protections. In other words, diligence should not end with a red-flag memo. It should shape how the deal is actually documented and managed.
What sellers should do differently
For sellers, the main defense against a longer diligence process is preparation, not optimism.
Conclave Partners should treat sell-side readiness as a value-protection exercise. EY says sell-side due diligence helps clients position the business effectively, reduce buyer disruption, and protect value by preparing for diligence in advance. It specifically points to building a credible financial narrative, anticipating likely buyer concerns, resolving balance-sheet and off-balance-sheet exposures, and addressing accounting policies that could materially affect reported results post-close.
That preparation should start earlier than many owners expect. A data room assembled after the LOI is rarely enough. The seller needs clean historical financials, a defendable earnings bridge, a clear view of working capital, organized contracts, documented tax issues, and a consistent explanation of commercial performance. If those basics are missing, no amount of deal momentum will prevent delay.
Sellers also need to anticipate that buyer questions now come from more directions. A modern due-diligence checklist can include cyber controls, privacy compliance, product roadmap risk, AI exposure, workforce issues, and sustainability obligations alongside the traditional financial review. A seller does not need a massive enterprise process to handle that reality. It does need a coherent internal owner for each topic and a plan for what can be answered immediately versus what requires more work.
How this looks in small and mid-sized deals
Small and mid-sized deals should not simply copy large-cap M&A playbooks. But they should not assume they are exempt from the same pressures.
The public evidence base is uneven. McKinsey’s sign-to-close research draws heavily from broader M&A markets, while EY and PwC describe the expansion of diligence categories from an advisory perspective across larger transactions as well as private deals. That means some headline statistics should be read as directional for smaller transactions, not perfectly identical to every founder-led sale.
Even with that caveat, the IBBA and M&A Source data makes one thing clear: lower-middle-market deals are not enjoying a simpler process. If the $5 million to $50 million band is seeing an 11-month average time to close and a 5.5-month LOI-to-close due-diligence period, then smaller private transactions are clearly facing meaningful execution pressure even without the full burden of public-company regulation.
The right response is proportional rigor. A small business does not need ten parallel diligence teams and endless reporting layers. But it does need clean numbers, organized documentation, faster Q&A ownership, and a realistic understanding that buyers are underwriting more than historical EBITDA. They are underwriting resilience, compliance, data quality, and the cost of fixing what is not ready.
A practical framework for keeping due diligence moving
A workable process usually looks simpler on paper than in reality, but the sequence still matters.
Before LOI, Conclave Partners should focus on seller readiness: clean up financial reporting, identify likely red flags, organize the data room, and decide who owns each response stream. That is where much of the later speed is won or lost.
After LOI, the buyer should align the diligence scope with the deal thesis and rank workstreams by materiality. Financial, tax, commercial, operational, HR, cyber, AI, product, and sustainability review do not all need the same intensity in every transaction, but they do need clear coordination.
During confirmatory diligence, both sides need one discipline above all others: issue triage. Questions that affect price, structure, closing certainty, or immediate post-close execution should move first. Nice-to-know requests should not clog the same channel. Where findings matter, they should be translated quickly into SPA, working-capital, or price-mechanism decisions rather than left floating in adviser memos.
Before closing, the final test is whether the deal team has converted diligence into decisions. Success should be defined narrowly here: not “all questions answered,” but “material risks understood, documented, allocated, and reflected in structure.” That is the point where a long diligence process stops being drift and starts becoming useful work.
Conclusion
The due-diligence process is getting longer in many deals, and it is clearly getting more complex. The best public evidence points to longer sign-to-close timelines, a record-long due-diligence stretch in the lower middle market, and a much broader diligence stack that now includes cyber, AI, workforce, sustainability, and product issues alongside classic financial and tax review.
That does not mean every deal needs a heavier process. It means buyers and sellers need a more disciplined one. Buyers need thesis-led scope and tighter prioritization. Sellers need earlier preparation, cleaner data, and a realistic view of what modern diligence now covers. If those pieces are in place, complexity does not disappear, but it becomes manageable.
FAQ
Is M&A due diligence really taking longer than it used to?
In many deals, yes. McKinsey reports that the median sign-to-close period rose to about 6.4 months from 2005 through 2024, and the IBBA/M&A Source Q1 2025 summary reported a record 5.5-month due-diligence period from LOI to close in the $5 million to $50 million segment.
Why has due diligence become more complex in recent years?
Because it now covers more than finance and legal review. EY’s current diligence framework includes commercial, operational, HR, AI, IT, product and technology, sustainability, cyber, and transaction-tax workstreams, while PwC points to expanding due-diligence and transparency requirements in the regulatory environment.
What usually causes delays during due diligence?
Common causes include weak seller preparation, inconsistent data, broader specialist review, regulatory scrutiny, and poor internal coordination over who answers which questions. Those causes are consistent with both McKinsey’s delay analysis and the lower-middle-market timing data reported by the IBBA and M&A Source.
How can sellers prepare for a longer diligence process?
By building the data room earlier, cleaning up financial reporting, anticipating buyer concerns, documenting exposures clearly, and assigning ownership for each diligence stream. EY explicitly frames sell-side diligence as a way to reduce buyer disruption and protect value by preparing in advance.
How can buyers keep diligence focused without missing major risks?
The most effective approach is to tie the diligence scope to the deal thesis and separate material issues from secondary requests. That keeps the process rigorous without turning it into an unfocused document collection exercise.
Does longer due diligence increase the chance of a price retrade?
It can. EY links diligence findings to normalized earnings, working capital, debt-like items, and negotiation terms, all of which can influence price and structure if issues surface late.
Which diligence workstreams matter most in small and mid-sized deals?
That depends on the deal thesis, but financial quality, tax exposures, commercial concentration, operational resilience, and technology or cyber risk are often decisive. The right scope is proportional, not generic.