The prospective buyer submitted an LOI demanding an open-ended ninety-day exclusivity period with automatic extensions. How do we negotiate exclusivity terms, milestones, and drop-dead dates in the LOI to stop a buyer from dragging out diligence?

Question

Tyler Smith · Accepted Answer

Signing an open-ended exclusivity clause is the fastest way to lose deal leverage. The moment you sign the letter of intent, you shut down conversations with other suitors. If the exclusivity window has no firm deadlines, an aggressive buyer will intentionally slow-roll diligence, drain your stamina, and present a price retrade in week ten when you are too exhausted to walk away.

Never grant a flat ninety-day exclusivity period. Limit the initial exclusivity window to forty-five days, and allow extensions only if the buyer hits strict operational milestones. The LOI must include explicit diligence gates: delivery of the buy-side Quality of Earnings initial findings by day thirty, distribution of the first draft of the definitive purchase agreement by day thirty-five, and delivery of binding senior lender financing commitments by day forty-five.

Include a hard clause stating that if the buyer attempts to reduce the purchase price or alter the core economic terms outlined in the LOI without discovering a material accounting discrepancy or legal defect, exclusivity terminates immediately. Require that any extension beyond forty-five days must be mutually agreed upon in writing rather than triggered automatically. Tying exclusivity directly to performance milestones keeps the buyer team accountable and prevents them from parking your deal on the back burner.