Smart Business Dealmakers: The Middle-Market M&A Podcast Letters of Intent with Tony Montanaro of Louis Plung & Co.
Apr 10, 2025
Tony Montanaro, a transaction advisory partner at Louis Plung & Company, dives into the intricacies of letters of intent (LOIs) and their critical role in mergers and acquisitions. He emphasizes the non-binding nature of LOIs while outlining how they frame negotiations. The discussion covers essential deal terms, purchase price structures, and often-overlooked non-financial aspects that could affect success. Montanaro also highlights the importance of seller involvement during transitions and the value of having a strong advisory team.
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Negotiate the LOI
- Sellers and their advisors can negotiate the LOI.
- Nothing starts until both parties agree on an LOI.
Binding and Non-Binding LOI
- While an LOI is typically non-binding, it contains binding provisions like confidentiality and exclusivity.
- Confidentiality protects the seller's reputation, and exclusivity gives the buyer time for due diligence.
Critical LOI Elements
- Critical LOI elements include acquisition structure (stock vs. assets) and purchase price.
- Consideration structure (cash, rollover equity, earn outs, escrows) is crucial.