M&A Legal Tips And Best Practices: Key Elements of a Letter of Intent

From a legal perspective, I want exclusivity. I want that to be legally binding.

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I want that to be spelled out in my LOI that while we are under LOI, I encourage searchers to get it for as long as they can—60 days, 90 days, sometimes only 30 or 20. While it's under exclusivity and the searcher is doing their homework, financial diligence, talking to financing partners, investing time and money, no one else should take that business away.

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In today's business market, where searchers are shooting out unsolicited offers, you can't be too safe. I even have deals where sellers are selling to their employees. I love these situations because the buyer has a leg up on financial due diligence. There's usually trust involved.

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But I still like to get legally binding exclusivity. If you're negotiating with your boss to buy that business for a million dollars and private equity swoops in with a three-million-dollar offer, that can be a real temptation for the seller. Exclusivity is the biggest concern with an LOI.

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The second is basic deal parameters and a purchase price that you can live with if everything is as represented.

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