Selling a Business — Stage 4: The LOI
You've been handed an LOI
What's actually happening
You have a formal offer. It outlines the purchase price, the working capital target, the exclusivity period, and the broad strokes of the definitive agreements. It feels like a victory, but it is actually the beginning of the most dangerous period of the transaction.
Where your broker is right now
They are telling you to sign it so the deal doesn't lose momentum. They are minimizing the exclusivity period and telling you that the legal terms can be worked out later during diligence. They want the clock to start.
What this costs you if it goes wrong
Signing an LOI with bad terms destroys your leverage. If you don't lock down the working capital peg methodology, the exclusivity triggers, and the structure of the earnout now, you will pay for it heavily in diligence.
What I'd be doing here
I review the LOI line by line before you sign it. We identify the traps, rewrite the exclusivity conditions to protect you, and ensure the working capital language matches how your business actually operates.
Related Insights for this Stage
What exclusivity in an LOI actually costs you
The moment you sign, your leverage shifts to the buyer. Here's how to price the risk.
The LOI is an art form
The nonbinding label on the front page describes the half of the document that isn't costing you anything. The skill is knowing what must be settled before exclusivity begins.
Are you in this stage right now?
If you are navigating the loi and need a second set of eyes on the details, let's talk.
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