LOI Advice

February 04, 2026

by a searcher from Elon University - Martha and Spencer Love School of Business in Denver, CO, USA

Hi, I'm a self-funded searcher and I currently have line of sight into a proprietary deal I sourced. I'm working with the sellers on a LOI but they're having some trouble understanding the more in-depth mechanics such as seller financing, forgivable notes, etc. I've explained in simple terms to try to get them there but curious if anyone has any good recommendations around this when you're at the 5 yard line with sellers. Also, given how emotional this is for them with 30+ years owning the business, has anyone found a way to mitigate against that dynamic either during negotiations or post close?

4 Likes

34 Replies

343 Views

Replies

Reply by a searcher
from University of Minnesota in San Diego, CA, USA

Encourage Seller to get some legal counsel involved now to help them through the process. If they don't understand what they're agreeing to in the LOI there is a strong chance the deal will fall apart further down the line.

Reply by an intermediary
from Georgia Institute of Technology in Houston, TX, USA

Hi Anon - Most sellers, especially those with lifelong businesses, have no idea what "all this selling stuff" means and can get pretty defensive. You're in a tough spot because you want to structure the deal in a way that they have "skin the game" to ensure the transition is successful. For smaller companies, I explain it this way...the purchase price that someone pays for your company rarely occurs all at once during a closing (unlike a house). You get a large percent at closing and then the rest over time. That's a way to ensure the company is successful during and after the transition. One of the ways is a seller's note. That's where you loan the buyer a certain percentage of the purchase price and they pay you back with interest over time. A forgivable seller's note is used if the company doesn't meet agreed upon targets after the sale. The note is then forgiven and you don't get paid back. These approaches of paying the full amount are ways to ensure I'm getting what I paid for. Three final thoughts - Recommend a right-sized M&A attorney. One that works with a company that size. No need for "big law" if they're not that big and they may scare them away. - If you have the ability for an in-person discussion, draw it out for them on a whiteboard. - Sellers think in terms of "when do I get my money". They're not thinking about all the things that may not work well when they leave because they've become accustomed to them. Help them see when they get their money and they're more likely to understand. Hope this helps. Thanks ^redacted‌.

+32 more replies.

Join the discussion