LOI counters in writing

November 26, 2020

by a searcher from New York Chiropractic College in Baltimore, MD, USA

I submitted an LOI to a broker for the business I'm interested in, didn't get anything back in writing. I asked for a counter and the broker said "that's not how it's done in the M&A world". He told me verbally the number and terms necessary (very one sided terms) it would take to get the deal done but nothing in writing from the seller. Broker wants me to submit a new LOI and now it feels like I'm negotiating against myself. Is it too much to ask for a written counter to my LOI? Two previous negotiations involved back and forth with the seller, this is my first interaction with a broker representing the seller.

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Reply by an intermediary
from The University of Chicago in Chicago, IL, USA

LOI, though non-binding, is a legal document. Attorneys advise seller not to respond in writing w/o their involvement. A Seller is not going to spend $ for every LOI they received. A better approach is to get the business terms out of the way by a term sheet, verbal conversation or an IOI. You need to be in the "zone" to get a response. If business terms are acceptable at a high-level, then next step is LOI..
If you do start with an LOI, a broker may, or should, get back to you verbally with areas that need changes. if they feel the "gap" can be bridged. That does not mean they will give exact counter. The "gap" can be price, structure, financing risk, buyer experience, buyer equity, style, etc.

Reply by a searcher
from University of Virginia in Richmond, VA, USA

I encourage you to be very Machiavellian. The ends justify the means. If the seller wants you to wear a clown suit and twirl a sign do it if the deal is worth it. I had to submit five LOIs on LuXout and they certainly didn't counter by adjusting the LOI. One business I sent an LOI to did though. It is all irrelevant in the end as long as the result is right. But note that a broker or seller are likely to play favorites with buyers. If you find yourself jumping through a bunch of unnecessary hoops then it's likely because you're not the preferred buyer in one of their minds.

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