M&A Talk (Mergers & Acquisitions), by Morgan & Westfield

Top 4 Issues for Sellers to Avoid with an LOI

Nov 16, 2023

Learn about the top 4 issues sellers make with LOIs, including setting up a data room, tax implications, understanding valuations, and managing expectations. Find out the dangers of unrealistic expectations and the costs of being unprepared in the sale process.

01:02:27

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Episode guests

Bill Snow

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Episode notes

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Quick takeaways

Preparing for taxes and understanding implications are crucial for sellers negotiating an M&A deal.

Effective due diligence preparation, including a comprehensive data room, expedites the M&A process.

Working with capable advisors and having audited financial statements are vital for a successful business sale.

Deep dives

Importance of LOI in M&A Transactions

The Letter of Intent (LOI) plays a critical role in M&A deals as it sets the groundwork for the eventual purchase agreement. While not legally binding in all aspects, it outlines key components such as price, terms, and structure, akin to getting engaged before the final marriage. Negotiating the LOI involves detail beyond just price, encompassing payment timing, asset purchase specifics, working capital considerations, and a roadmap for the final purchase agreement.

Introduction

2min

Navigating the Letter of Intent in M&A

15min

Navigating Shifting Expectations in Seller Negotiations

2min

Navigating Seller Expectations and Valuations

12min

Navigating Tax Implications and Due Diligence in Acquisitions

4min

Preparing a Data Room for Business Sale Negotiations

14min

Navigating Valuation Pitfalls in M&A Negotiations

2min

Navigating Deal Value and Structure in Business Transactions

9min

Emphasizing the Importance of Preparation and Audited Financial Statements in Selling a Business

3min

Negotiating a clear letter of intent keeps a seller’s position strong throughout the sale process. Bill Snow returns to discuss the top four mistakes sellers make with the LOI and his tips on avoiding these issues. He highlights the importance of planning for taxes and understanding the tax implications of a sale from the outset, how valuations vary and what can impact them, setting up a data room for due diligence before the LOI stage, the dangers of having unrealistic expectations, and the costs of not being prepared.

View the complete show notes for this episode.

Learn More:

Additional Resources:

Planning to sell your business? Schedule a free consultation today.
Download a free PDF copy of The Art of The Exit: The Complete Guide to Selling Your Business and Acquired: The Art of Selling a Business With $10 Million to $100 Million in Revenue.
Purchase your copy now of A Beginner’s Guide to Business Valuation | The Exit Strategy Handbook | Closing the Deal
Contact Morgan & Westfield to request a free copy of Jacob Orosz's latest book, Food and Beverage M&A: An Insider’s Guide to Selling a Food or Beverage Manufacturing, Distribution, or Grocery Business.
To suggest guests, topics, or questions for future podcast episodes, contact Morgan & Westfield.

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M&A Talk (Mergers & Acquisitions), by Morgan & Westfield

Top 4 Issues for Sellers to Avoid with an LOI

Episode guests