Do you normally add a deadline to respond when submitting an LOI?

November 15, 2024

by a searcher in St. Petersburg, FL, USA

I submitted an LOI on a company 3 weeks ago.

The broker kept having an excuse as to why is wasn't signed yet.

then yesterday the broker told me another offer came in from someone with experience in the industry and the seller is leaning toward accepting

So now I'm thinking I should have put a deadline to respond. So my question is what's a reasonable deadline? 2 weeks?

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Reply by an intermediary
from Harvard University in Fredericton, NB, Canada

Time kills deals. Can’t stress this enough. You have got to put deadlines on every part of the deal starting with the LOI. Once accepted you have to put a deadline on the DD and then a closing deadline. You can even look at look at placing penalties (fees) for missed deadlines. This is normally done in large M&A deals but nothing wrong with size appropriate penalties. I often have $10k, $20k, $30k penalties on deals under $1 million. That money goes to me as the broker cause sometimes it’s both sides that’s wasting my time.
Never had to collect it but came close a few times. This is why it’s useful to use a buy side broker. We get to play the baddie and keep pushing on your behalf.
Good luck with this. Make sure it’s a business you really want AND from a seller you want an ongoing relationship with. In this era of boomer exits, you can have your pick of the BEST.

Reply by a searcher
from University of Missouri in Kansas City, MO, USA

Sorry you were slow played. Even when working with a broker, the terms of the LOI are yours. I agree with previous posters, a five-day deadline is plenty of time to ensure a reply. You can be flexible after you receive a reply, particularly if they counter on price or some term.

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