The buyer is insisting on a sixty-day exclusivity period in the Letter of Intent but has a track record of re-trading deals at day fifty. How do we structure milestone-based exclusivity triggers and break-up fees to keep them honest?

Question

Tyler Smith · Accepted Answer

A long exclusivity period in a Letter of Intent gives the buyer all the leverage. Once you sign, you are locked out of the market, and some buyers will intentionally drag their feet, waiting until day fifty to manufacture a crisis and demand a price reduction, knowing you have already invested heavily in legal fees.

To prevent this, never grant a blank sixty-day exclusivity period. Instead, structure your Letter of Intent with milestone-based exclusivity extensions. For example, grant an initial twenty-one days of exclusivity. This period only extends by another fifteen days if the buyer completes their physical due diligence and delivers a draft purchase agreement.

Another excellent tool is a non-refundable diligence deposit or a break-up fee. If the buyer walks away from the deal for any reason other than a material breach on your part, they forfeit the deposit to compensate you for your time and expenses. Keep your leadership team focused on daily operations by using your weekly Level 10 Meeting to monitor diligence milestones. If the buyer misses a deadline, the exclusivity automatically expires, and you can immediately walk away. This setup forces the buyer to move quickly and keeps the playing field level throughout the transaction.