We have received multiple indications of interest but want to ensure the final deal structure matches the LOI terms. How do we structure the letter of intent to minimize post-LOI price chipping before we sign exclusivity?

Question

Tyler Smith · Accepted Answer

The moment you sign a letter of intent and enter an exclusivity window, you lose your primary source of leverage, which is the threat of walking away to a competitor. Buyers know this. They will often submit a high headline offer to win the LOI and then use due diligence to chip away at the purchase price. To prevent this, you must demand extreme specificity in the LOI before granting exclusivity. Do not accept a vague purchase price range. Require the buyer to define the exact multiple they are applying and the specific financial metrics they are using to calculate EBITDA. Furthermore, the LOI must explicitly detail the proposed deal structure. This includes the exact split between cash at close, seller notes, rollover equity, and earnouts. It must also define the working capital peg methodology and list the specific indemnification caps and baskets. Use your leadership team's weekly Level 10 Meeting™ to review these terms. Use the IDS® process to identify, discuss, and solve any ambiguities before your lawyer drafts the response. If a buyer resists providing this level of detail upfront, it is a major red flag. It means they intend to renegotiate the deal once you are locked in. Keep the bidding open until these details are locked down in writing.