What is in a letter of intent?
- The price and how it will be paid (cash at closing, earn-out, vendor financing)
- Whether it's a share purchase or an asset purchase
- How working capital will be measured at closing
- What the buyer still needs to check in due diligence
- Your role after the sale
- Exclusivity: how long you agree to stop talking to other buyers
- Confidentiality
Why is exclusivity so important?
SHORT ANSWER
Once you sign an LOI with exclusivity, you usually can't talk to other buyers for a set period. That's when your leverage drops. If the buyer finds a problem in due diligence and asks for a lower price, you no longer have other offers to fall back on.
Keep exclusivity periods short, and settle important terms in the LOI rather than leaving them for later.
What is an Expression of Interest?
SHORT ANSWER
An Expression of Interest (EOI) is an earlier, non-binding note in which a buyer outlines their view of price and terms. Collecting EOIs from several buyers before signing an LOI lets you compare options while competition is still alive.