I recently posted a thread about the components of the Letter of Intent in #smb #acquisitions. Today's post talks about a few Dos and Don'ts when it comes to putting together your #LOI:

Do: clearly identify the core elements to be explored in due diligence in order for the transaction to close. Elements include customer information, key assets, and working capital needs.

Don't: allow your lawyer to take over the deal due to a vague LOI. Detailed LOIs can prevent lawyers from getting too involved negotiating minor points, because they've already been presented in the LOI. Time (and overzealous lawyers) can kill deals.

Do: take your opportunity to explore the business carefully during due diligence, bringing in experts when needed and clearly communicating any issues that come up, along with how they may impact the price.

Don't: use due diligence as a way to re-negotiate an offer after obtaining exclusivity through an LOI unless warranted. While a lower price may be justifiable based on findings, you should be prepared to pay the LOI cost. "Re-trading" a deal in bad faith is considered unethical.

Don't: go under LOI with multiple businesses at the same time. This tactic can lead to potential legal challenges, damage to the buyer’s reputation, and ultimately strain the buyer’s resources due to the costs of managing several different deal processes simultaneously.

Hope this was helpful! If this kind of tactical advice is interesting, make sure to check out our Private Market Insights episode with ^Searchfunder member‌ this Thursday at 3 CT, here on Searchfunder!

Here's the link: https://www.searchfunder.com/event/view/1210