When the Seller has narrowed the prospective Buyers down to one, a Letter of Intent is requested from the Buyer. The Letter of Intent will spell out the Terms and Purchase Price that the Buyer is willing to pay, which has presumably been verbally agreed to. Among other items, the Letter of Intent will be based on the Buyer receiving a number of days of exclusivity to complete due diligence and finalize documentation. This period of time usually ranges from 60 to 90 days.
During the Exclusivity Period the Seller agrees to cease to solicit any potential offers or to negotiate or participate in discussions with others in connection with the possible sale of the Company. Although, in general, the Letter of Intent is Non-Binding on both parties you can expect that it will state in the Letter of Intent that the Exclusivity Period and Confidentiality Terms will be binding and subject to legal rights.
As you can see, the signing of a Letter of Intent by the Seller effectively takes your Company off the market for the Exclusivity Period. As a Seller, before signing, you should have concluded that this Buyer’s offer is the deal you want. There cannot be any further negotiations with other parties during the Exclusivity Period.
If you want to chat, give me a call at 703-837-1095 or e-mail me at tcobery@idealliance.org.