LOI w/out meeting the seller

by a searcher from Columbia University - Columbia Business School

1 month ago

I'm attempting to acquire a small business. The broker provided a short CIM that gives some information but not much. The broker is requesting an LOI before allowing meetings with the seller. I'm wondering: 1) How typical is this? 2) Meeting the seller seems critical to understanding the business, the seller's motives, and, most importantly, giving a credible valuation range for the offer. How have others bridged this gap?

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searcher from Fundação Getulio Vargas, São Paulo - Escola de Administração de Empresas de São Paulo

If you are truly interested in the business, I would recommend moving forward but with a structured approach: list and prioritize all the critical issues to be addressed during due diligence, including meeting with the sellers, within the LOI. For instance, I would suggest not advancing with the DD process until all high-priority issues have been resolved. This approach helps save time and money and provides a solid basis for any necessary adjustments to the LOI after the final analysis.

1 month ago | like reply | 0 likes

searcher from University of California, Los Angeles - UCLA Anderson School of Management

The only material binding clause in an LOI is exclusivity, which is in your favour. So I would say go ahead with the LOI if you like the business, and specify the additional information you want to review and the meetings you want to have as part of the document. If they sign it, they've only given you the advantage of exclusivity, but my guess is that they will negotiate it further and probably offer you a meeting before signing.

1 month ago | like reply | 1 like

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