What's Happening?
Private equity (PE) dealmaking in the U.S. is experiencing a recovery after a challenging period in 2023, with deal value and count showing significant increases in 2024 and 2025. However, the process of completing these deals has become more prolonged
due to several factors. The elevated cost of debt has altered the dynamics of PE dealmaking, with lenders exercising greater scrutiny before extending credit. This has led to longer due diligence processes, complex financing arrangements, and heightened regulatory scrutiny, stretching deal timelines beyond traditional time frames. The time between signing and closing PE M&A deals increased by 64% from 2023 to 2024, according to the Goodwin Deal Terms Database. Sponsors are expanding their diligence processes, adding weeks or months to deal timelines, and facing more comprehensive regulatory requirements, which can delay transactions further.
Why It's Important?
The extended timelines in M&A deals have significant implications for private equity sponsors and sellers. Higher interest rates and tighter credit terms impact acquisition strategies and return models, leading to fewer sponsors meeting aspirational valuations for assets. Sellers face fewer potential buyers willing or able to meet their valuation expectations, resulting in a decline in 'front-running' deals. The extended processes provide opportunities for deeper market analysis and competitive positioning, allowing sponsors to conduct thorough management assessments and develop detailed value creation plans. This preparation enables more confident bidding and better post-acquisition execution. Additionally, longer timelines allow for more comprehensive due diligence, reducing execution risk and enabling more accurate valuation.
What's Next?
Private equity sponsors are learning to use extended deal timelines strategically. By leveraging speed as a differentiator, sponsors who can commit to accelerated timelines gain competitive advantages. This involves having preapproved financing, streamlined diligence processes, and dedicated deal teams ready for immediate deployment. Sponsors can also use extended timelines for competitive intelligence, conducting thorough market analysis and identifying operational improvement opportunities. Managing seller relationships effectively during long processes can provide advantages in final negotiations. Understanding that PE deal processes now take longer allows sponsors to time their market entry more strategically, engaging with attractive targets earlier in their development cycles.
Beyond the Headlines
The shift toward longer M&A deal timelines reflects broader changes in the private equity landscape. The increased focus on due diligence and regulatory compliance highlights the need for greater certainty in a cautious market environment. Buyer-side representations and warranties insurance policies are growing in popularity, requiring thorough due diligence processes and contributing to extended timelines. The intensified regulatory environment, including domestic antitrust regimes and international guidelines, necessitates more robust diligence exercises. These changes indicate a more cautious approach to dealmaking, with sponsors adapting strategies to gain sustainable competitive advantages in a challenging market.
