We lost a deal once because our diligence took too long.
Not the formal diligence. The weeks of work between "this looks interesting" and "we're ready to submit an LOI."
The target was a multi-site physician group in a market where we needed density. Good payer mix. Founder approaching retirement. No banker involved. Our team was running three other active processes simultaneously. The lead who would normally own the pre-LOI work was buried in a closing. I was the one pulling market data, building the preliminary model, cross-referencing the competitive landscape, and validating payer mix against internal data. All while managing two other targets.
By the time we had a package ready for our IC, another group had submitted an LOI with a 30-day exclusivity window. They did enough homework to move with conviction. We hadn't.
That bottleneck is the same one I hear about in almost every conversation with corp dev teams today.
The Layer Nobody Measures
Most deal teams track days-to-close. Almost none measure the hours per target between "first look" and "LOI submission."
Pre-LOI diligence in healthcare M&A is a stack of analytical work: market sizing the target's geography, validating seller financials against benchmarks, building a preliminary model, mapping the competitive landscape, assessing operational fit against the platform thesis.
Each layer is a 10-20 hour exercise when done manually. For a team running 3-5 active targets, that's 50-100 hours of pre-LOI work in flight. Spread across 2-3 people also managing live closings and board reporting.
LBMC's analysis of the current healthcare transaction landscape states it directly: "The traditional approach of signing an LOI and then performing diligence has given way to a new model: conducting targeted, high-impact diligence before exclusivity." They found that buyers who do this "consistently separate successful acquirers from those who struggle to close."
The problem is typically not awareness. The problem is that the work required exceeds the bandwidth of most lean corp dev teams. When bandwidth is the constraint, you move too slow and lose the deal, move too fast and miss something, or your senior people burn out doing analyst-level research because there's nobody else.