Offer Letter

by a searcher from Utah State University

2 years ago

I'm creating an offer for an IT company.  The seller has only provided P&Ls for the past three years.   I've asked the seller for tax returns,CF/BS, and he has declined until after I put in an offer.  The P&Ls are not very clear, my accountant trimmed them down and we're unable to discern where the owner's salary/disbursement is so it reduced my valuation of the company to 1/3 the asking price.  I told the broker up front that w/o the other docs, the offer would be low.  I'm sensing a few red flags here.  Any thoughts?

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12 comments

searcher from Manhattan College

Also in agreement with Bernard and Jarryd. LOI with language contingent on clarifications on the financials especially if they are of concern

2 years ago | like reply | 0 likes

searcher from Harvard University - Harvard Business School

I have a different POV. The seller is reluctant to share more until he concludes you’re a real buyer. The validation point is having an offer in hand. LOIs are non-binding, so why not write up an offer based on the info the seller has provided (not the lowball offer), and if you don’t like what you see on the tax returns or any other diligence docs, you walk just like any other deal.

2 years ago | like reply | 1 like

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