Benefit of LOI Repetitions

searcher profile

June 30, 2022

by a searcher from Massachusetts Institute of Technology in New York, NY, USA

Self-funded searcher here. One stat I keep reading/hearing is that it takes 3-4 LOIs before closing on a deal (of course case by case but generally speaking). Why is that?

1. What are the incremental learnings from each failed deal (post-LOI)?
2. Also, how do self-funded searchers survive diligence costs from 3-4 DD processes ($20k+ QoE, $40k+ legal, etc.)?

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commentor profile
Reply by a searcher
from Anderson University in Canton, OH, USA
I was a self funded searcher and went through 2 LOI's before successfully closing on my 3rd. On the 2 that failed, I was able to find the deal killers early in the process before spending significant money on 3rd party diligence. I think one of the toughest parts of self funded search is the risk the searcher takes on dead deals. Even if you have investors, a bank, and a seller committed to a deal, it can still fall through up through the last minute, and it seems to me that each of the other parties has more opportunity to back out without penalty than the searcher. Fortunately in my case the deal closed and all was well, but it was stressful going through the process. In short, try to find the deal killers yourself before you get into paying third parties. Best of luck to you.
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Reply by a professional
from University of Southern California in North Palm Beach, FL, USA
Too many searchers don’t know enough about what should occur pre-LOI, which stifles their opportunities. And leaves open the door for buyer competition. Listen to the recordings of my webinars for insights. Part 1: How Pre-LOI Due Diligence Can Crater Deals: https://youtu.be/EMhsZo1-40Q Pre-LOI Due Diligence Q&A - Part 2: https://youtu.be/PK0_3jHyG_M Afterwards, we can Zoom if you want to talk about it.
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