The buyer is pushing for a 90-day exclusivity period in the Letter of Intent, but we are worried about losing leverage and getting re-traded late in diligence. How do we structure the LOI exclusivity provisions to keep the buyer moving quickly toward close?

Question

Tyler Smith · Accepted Answer

A blanket ninety-day exclusivity window strips away your negotiating leverage and gives the buyer an incentive to run a slow, deliberate diligence process while your business sits off the market. Once exclusivity is signed, you cannot talk to backup bidders, and buyers know your deal fatigue peaks around day sixty.

Protect yourself by structuring exclusivity around phased milestones rather than an open calendar block. Give the buyer an initial exclusivity term of forty-five days. Make any extension to sixty or seventy-five days contingent upon specific performance markers delivered in writing. Required milestones should include:

- Delivery of the initial third-party Quality of Earnings report within thirty days.
- Delivery of the first comprehensive draft of the definitive purchase agreement within forty days.
- Written confirmation of senior debt underwriter approval or equity financing commitments within forty-five days.

If the buyer fails to hit any milestone, exclusivity should terminate automatically unless you elect to waive it. In addition, include a clear provision stating that if the buyer attempts to reduce the headline enterprise value or alter key economic terms without discovering a verifiable, material adverse change, exclusivity immediately lapses.

Treat the closing process like a major corporate Rock. Put your Integrator or deal quarterback in charge of tracking weekly diligence deliverables. When buyers realize that their clock is running and that unexcused delays forfeit their exclusive rights, their diligence teams find a way to complete their reviews on schedule.