How a Letter of Intent Can Save Your Deal

About 70% of completed acquisitions fail, and even more attempts at M&A fail to reach a deal. Part of the challenge is the mix of buyers and sellers who envision dissimilar outcomes. In the pursuit of a deal the two sides have different goals and different perspectives. As in a house sale, buyer and seller are on opposite sides of the equation. Either side may give up on the transaction prematurely.

Buyers worry about overpaying and taking on unknown risks and liability. Sellers fear selling too low and that the buyer may walk away from the deal.  In many cases, a Letter of Intent can bring the two sides together. Although it doesn’t require a legal format, an LOI allows you to start thinking about where the overlap between buyer and seller lies.

When both parties sign the LOI, you and the other party have a moral obligation to move forward. Since an LOI is typically non-binding, the deal could still fall apart, but this document does establish a framework for buyer and seller to start working towards a common goal.

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