The prospective buyer is demanding a ninety-day exclusivity period in their Letter of Intent without offering a reverse breakup fee or proof of committed financing. How should an owner negotiate LOI exclusivity terms to protect deal leverage and prevent drawn-out diligence?

Question

Tyler Smith · Accepted Answer

Exclusivity is the single greatest concession a seller makes during an M and A transaction. Once you sign an exclusivity clause, you legally bar competing bidders from the table, surrender external market pressure, and expose your company to re-trading if the buyer stalls. Granting ninety days of unearned exclusivity to a buyer who lacks committed financing effectively grants them a free option on your business while they arrange equity or debt.

Never accept more than forty-five to sixty days of initial exclusivity. Link that exclusivity window directly to mandatory performance milestones the buyer must hit to maintain deal protection. Require the buyer to deliver a completed Quality of Earnings draft by day twenty-five, provide a formal debt commitment letter by day thirty-five, and deliver initial drafts of definitive purchase agreements by day forty. If the buyer misses any of these operational milestones, exclusivity should terminate immediately or convert into non-exclusive negotiations.

Demand written verification of committed capital before signing any LOI. If the buyer is a private equity firm using third-party debt, require a written summary of their existing credit lines or a signed term sheet from their lending partners. Maintain deal momentum by keeping your virtual data room fully populated in advance. Signal clearly to the buyer that your leadership team manages transactions against firm timelines, exactly as they manage quarterly Rocks and Scorecard targets inside the business.