LOI Landmines: 3 Mistakes Business Owners Make Before Diligence Even Starts

Описание: Some business owners think the LOI is a step towards the real agreement.

In reality, with a signed LOI, 80% of the deal is already baked in...

Moreover, once you sign, you are usually tied into an exclusivity period for 60 to 120 days - That is time you cannot get back.

Here are 3 Letter of Intent (LOI) mistakes we've seen sellers make that quietly cost real money and leverage:

Mistake 1: The LOI is too short

If it is basically headline price plus a vague reference to "all other customary terms", it is not a real LOI, it is a placeholder that gives the buyer room to reshape the deal later.

Mistake 2: The LOI is too long, but doesn't define the structure.

Many pages does not mean it is specific. If you cannot explain the deal structure clearly in a 10 minute conversation with the barista at Starbucks, it is not defined enough. Define the structure: timing, risk, contingencies

Mistake 3: The transition is not clearly defined

This one risks blowing up the deal deep into the process. Owners have come to us after months of time and tens of thousands of dollars spent in previous engagements where they thought the transition was six months and the buyer thought five years, only to come to a head three weeks before a closing is supposed to happen.

Before you sign a Letter of Intent, make sure any LOI clearly (very clearly) covers:

1.) Price
2.) Structure
3.) Transition
4.) Stakeholder/Employee Considerations

The LOI is not a formality.

It is the blueprint for diligence and the source of your negotiating leverage.

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