How many LOI's before an acquisition?

April 01, 2025

by a searcher in Chicago, IL, USA

I'm wondering, in everyone's experience, what did your funnel look like in order to get to a closed deal?

How many businesses analyzed?
How many IOIs?
How many LOIs?

Is there a general accepted rule for the numbers based on available data? Thank you

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Reply by a professional
from University of Southern California in North Palm Beach, FL, USA

Thanks, again, ^redacted‌ - over the decades with clients worldwide, but mostly in the USA and Canada, my clients who have completed deals have submitted two or three LOIs. We don't do it as you read online where people boast about wallpapering the by dealmaking field with LOIs. That's stupid and a fast way to be blacklisted by everybody (worthwhile). And we don't submit two at the same time. If we have an opportunity as good as another, we tell the sellers that we're going to select one and we ask them how serious they are about doing a deal with us. If we don't like their answer, we do not tell them to go away. We tell them if the other deal doesn't succeed, we'll come back to them. We don't shut doors on opportunity. (This works for us because we know how to generate a continuous flow of worthwhile opportunities.)

Does this make sense to you?

Reply by an investor
from University of Illinois at Urbana in Chicago, IL, USA

Thanks ^redacted‌ - There are certainly rules of thumb as others have indicated below. And the answer for ETA / indy sponsor is not the same for traditional PE fund business. In this world, you usually have to kiss plenty of frogs, put in a bunch of IOIs, and likely lose at LOI stage. In our case, as an example, we have closed on every LOI submitted - eventually. But we are not in the volume / asset management game. And we got lucky intersected with decade and a half of experience before chasing more indy sponsor / ETA type deals. I have friends who started from 0 and closed deal off maybe 2 LOIs in 6 mos. That is NOT normal. My advice is be patient, get out there and look at a lot, but only submit an LOI when you mean it. Again, not the same as PE fund world. Then chase it with your personality, relationship, etc.

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