How can we educate a non-M&A lawyer and an unsophisticated seller on the typical mechanics and valuations of a deal? Does anyone have any good third-party source to help show what is typical in a transaction? Must be very digestible for non-professionals.


I am helping negotiate an LOI on the buy-side, the lawyer is not M&A focused and does not seem to understand how a typical M&A transaction works. The broker understands typical mechanics and is trying to educate the parties but so far has been unsuccessful.

Firstly, the lawyer is proposing very atypical terms. They want a non-cash free debt-free transaction, no escrow, a significant earnest-money deposit upon signing LOI, etc.

Secondly, we offered a generous 5x multiple on earnings at $10m despite massive seller concentration, but the lawyer is trying to get an unreasonably high number citing the following poor valuation methodologies:
-Replacement value to create the same new manufacturing line of $12m (real equipment FV is about $5-7m)
-IRR of getting $2.4m annually being paid back in est. 4 year period (really not EBITDA, plus you have $350k CAPEX per year)

We really want to get this deal done given the appeal of the business for our strategy but a path forward is difficult, any recommendations would be helpful