How to Expedite the Senior Living Sales Process (part 1 of 2)– by Jason Punzel
One question we often get asked by our Sellers is how to expedite the senior living sales process. While there are many ways, such as shortening the due diligence process or the closing period, there are two ways the buyer and seller can work together without sacrificing any of the buyer’s precious due diligence time.
The first way is to conduct due diligence simultaneously while negotiating a Purchase and Sale Agreement (PSA). Typically, after the Letter of Intent (LOI) is signed, the buyer’s attorney drafts a PSA, which takes 10-14 days, and then the Seller’s attorney reviews, redlines and sends back. There are usually several “turns” of the PSA and the entire process can take 30 days, often times longer. After the PSA is signed, due diligence starts, which takes another 30-60 days.
There is no reason why due diligence can not start upon signing a LOI. An Access Agreement needs to be put in place to protect the buyer and seller during due diligence, but that is a short agreement which takes little negotiation. The buyer and the buyer’s lender must be ready to order third party reports very quickly as these reports take 4-6 weeks to get back, but well organized, experienced buyers can have this ready upon signing the LOI.
There are several reasons why this often doesn’t happen. Sometimes Buyers don’t want to spend money and Sellers don’t want to disrupt their community with third party reports until they both know they have a signed PSA. Additionally, Buyers often uses the time to negotiate a PSA as extra due diligence time and may not want give this up.
However, we have conducted due diligence and negotiated a PSA simultaneously several times and when both the Buyer and Seller are in motivated, the process works very smooth. Additionally, this is a standard practice outside of the real estate world in M&A.
Although there are some reasons as to why Buyers and Sellers may not want to negotiate a PSA and conduct due diligence simultaneously, it can greatly expedite the sales process. When conducted with an experienced Buyer and Seller, it can be done smoothly and with little risk.
We will publish part 2 of 2 next month.