We are about to sign a Letter of Intent, but we are worried about the buyer using the exclusivity period to re-price the deal based on minor operational fluctuations. How do we structure the LOI to protect our valuation during this window?

Question

Tyler Smith · Accepted Answer

The exclusivity period is the most vulnerable phase of a transaction for a seller. Once you sign the Letter of Intent and agree to exclusivity, you lose your competitive leverage because you cannot talk to other buyers. Some buyers will intentionally exploit this window, using minor operational dips or newly discovered risks to demand a price reduction just before closing. To protect your valuation, you must negotiate protective guardrails directly into the Letter of Intent before you sign it. First, demand a tight exclusivity window, ideally no longer than forty-five days, to keep the buyer moving quickly. Second, define exactly what constitutes a material adverse change, ensuring that normal, minor seasonal fluctuations in your monthly revenue cannot be used as an excuse to re-price the deal. Operationally, you must keep your foot on the gas. Do not let your leadership team get distracted by the deal team's requests. Keep running your weekly Level 10 Meeting and holding your team accountable to their quarterly Rocks and Scorecard targets. By maintaining operational discipline and meeting your financial forecasts during the exclusivity period, you deny the buyer any leverage to re-price. Consistent weekly numbers are the absolute best defense against deal-table renegotiations.