The private equity deal process looks different from the fund side than from the seller's, because the fund is running an internal approval process at the same time as an external transaction. Seven stages and two committee moments, and the first committee is the one that matters most: it decides whether to spend real money finding out. This page walks the seven from a fund's point of view.
Stages one to three: source, screen, and the first committee
The opportunity arrives, an associate screens it in days, and if it survives it goes to a first committee that authorises spending on diligence. That authorisation is the expensive decision, because everything after it costs advisers' fees whether or not the deal closes.
Stages four and five: indicative offer and exclusivity
An indicative range on the information available, then, if selected, exclusivity. From here the fund is spending seriously and the seller has lost competitive tension, which is why a fund's indicative range is frequently at the optimistic end of what it will actually pay.
Stage six: diligence, and the second committee
Six workstreams in parallel and a final committee that approves the deal on the evidence produced. On this site's worked example the chasing alone is 164.16 hours and $15,595.20 of the fund's own analyst time, which is invisible in every adviser quote.
Stage seven: negotiation to signing, and the price walk
Adjustments arising from diligence, the completion mechanism, and the warranty and indemnity package. The gap between the indicative range and the final number is the process most sellers remember, and it is smaller when the seller ran vendor diligence and larger when they did not.
Questions people ask about private equity deal process
Which decision costs the most?
The first committee, which authorises spending on diligence. Everything after it costs advisers' fees whether or not the deal closes.
Why do indicative offers move?
They are made on limited information at the optimistic end, and diligence produces adjustments. Vendor diligence narrows the gap.
What does the fund spend that nobody quotes?
Its own analyst time chasing the request list: 164.16 hours and $15,595.20 on the worked example here.