Strategic Considerations When Deciding How & When to Issue an LOI

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August 04, 2022

by an investor from Harvard University - Harvard Business School in Toronto, ON, Canada

All- I've written the blog post below in response to several FAQ's I've received from prospective purchasers related to LOIs. Namely:

(1) How liberal should I be in issuing LOIs? How early in the process should I issue them?

(2) If most terms within an LOI are non-binding, how useful can they be?

(3) Should LOIs be detailed, or written at a high level?

(4) Who should propose a valuation first: Buyer or Seller?

After reading this, I hope you'll leave with an enhanced appreciation for how savvy acquirors can utilize LOIs strategically, for purposes well beyond the simple act of papering their desire to purchase a company exactly as outlined in the document.


Link below. Happy reading.


Strategic Considerations When Evaluating a Letter of Intent to Sell Your Business

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Reply by an investor
from University of Pennsylvania in Charlotte, NC, USA
Steve, Really thoughtful and balanced blog that should be helpful to both buyside and sellside. Curious what size (range) transactions do you have in mind in your discussion? It seems the behaviors, motivations, players (for example advisors) and expected practices vary from smaller deals say <$5 million vs larger ones of $20 million and up. Not for everything, but some critical elements. For example, in larger competitive deals, an experienced sellside advisor is going to send the CIM along with a process letter including a description of the expected content of an IOI or LOI. This preempts the buyers who would present a meaningless "LOI" in an attempt to get all the leverage of exclusivity and take advantage of an inexperienced seller. Thoughts?
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Reply by a professional
from University of Southern California in North Palm Beach, FL, USA
Today I added 10 brief podcasts on the topic that interests you.
My YouTube channel: https://www.youtube.com/TedLeveretteTheBusinessBuyerAdvocate
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