405 days until the deal is done – How investors can accelerate transaction processes

It’s not quite as hopeless as in Samuel Beckett’s Waiting for Godot, where two men wait in vain for someone who never comes. However, at an average of 405 days to close a transaction last year, many investors found the experience to be frustratingly drawn out. That was up from 374 days in 2023, positioning Germany as one of the leading countries in Europe in terms of transaction completion time, second only to the United Kingdom where real estate professionals typically wait an average of 499 days for deals to close.

The reasons for this negative development are quite clear. Investors point to the increasing demands of Environmental, Social, and Governance (ESG) criteria, regulatory requirements, and stricter guidelines as the primary causes for delays – especially for large portfolios. And real estate transactions not only involve moving a lot of money, but also more and more data. In 2023, there were 3.0 gigabytes of documents and records per transaction; this figure has now risen to 3.6 gigabytes.

Appeals to politicians are often disregarded, so investors must take it upon themselves to develop more efficient processes in order to reduce time-to-market and time-to-close risks. After all, these risks are real: buyers and sellers may back out, liquidity is not always assured, and market demand can shift more quickly than expected. Efficient processes are the key to avoiding delays. However, the potential for improvement is within reach.

Streamline processes, improve coordination, and honour the handshake

First of all, investors should carefully analyse their own processes. Which control mechanisms do little to enhance security but a lot to hold up the process? Which phases of due diligence can be conducted simultaneously? Which legal contrivances really need to be included in the purchase agreement? And how can cooperation with external service providers, both domestically and internationally, be improved?

International deals often fail due to language barriers, missing documents, and unclear responsibilities. If reports go missing or documents exist in different versions, an entire transaction can be jeopardised. A single source of truth and clear communication with partners can speed up the process considerably. This is because transactions often hinge on legal details – and on the parties themselves. Relying on tactical contractual clauses or incorporating unnecessarily complicated safeguards can hinder progress on closing any deal. Clear and binding commitments are essential. Establishing a reputation as a reliable and trustworthy partner does a lot to speed up negotiations.

Targeted application of new technologies throughout the transaction process

Artificial intelligence (AI) and technology can significantly expedite the transaction process – with no immediate need for neural networks to calculate purchase prices or risks. The automated capture, searchability, and translation of documents are enough to save valuable time on their own. Many investors simply underestimate how inefficient traditional processes can be: While AI is already capable of running complex analyses, it is not uncommon for deals worth millions to be conducted through insecure channels such as WhatsApp, posing a significant security risk that can certainly result in hefty fines. Just recently, for example, the SEC in the USA fined eight investment companies 63 million dollars for this very reason.

Investors must not only optimise their transaction processes from a technical standpoint but also from an organisational perspective. Because efficiency alone is not enough. A strong reputation as a reliable partner can often expedite negotiations more effectively than any technological innovation. However, without centralised and transparent data management, even the most promising deal can become unnecessarily complicated.