Dealing with Inventory in an LOI

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by a searcher from Yale University - School of Management
in Jupiter, FL, USA

2yrs ago

Dealing with Inventory in an LOI

How do you deal with inventory in an LOI? The seller claims it is A LOT of inventory, and I can't inspect it and get a value on it before signing the LOI and doing DD.

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reply by a searcher 2yrs ago
from INSEAD in Chicago, IL, USA

Dealing with this exact situation in my current deal - Still negotiating with the seller that a NWC peg from the TTM (including inventory/AR/AP) should be included in the asking price as I am payingredactedtimes EBIDTA for the business.

reply by a searcher 2yrs ago
from Brigham Young University in Provo, UT, USA

The NWC peg would be important, and also determining a method for how the inventory would be valued at the time of inspection. I wouldn't be overly worried about not being able to inspect the quality of inventory pre-LOI as long as the LOI spells out how that will be tackled at the time of inspection.