Rules of Dating: When to Introduce the Seller Note?
March 17, 2025
by a searcher from Harvard University - Harvard Business School in Washington, DC, USA
When is the appropriate time to discuss seller notes and their details, so that you're still being considered a competitive, prospective, buyer?
Or perhaps a better way of asking -- what do you reveal at what point?
For e.g., Pre-IoI - that a seller note will be required
IoI - Seller note as part of consideration (is it advisable to mention percentage of note, interest rate, forgivable vs. not here?)
LoI - Lay out the details: percentage, forgivable/not forgivable, rate etc. Do you leave anything out here for future negotiation?
I'm asking from the lens of not wasting anyone's (including my!) time on a deal where terms were never going to be accepted; but also cognizant that showing all cards at once (or at IoI) could make you look less viable than someone else, who is simply planning to negotiate this later! Also in the interest of avoiding deals falling apart later.
Any insight here into what's "typical", or what people are doing will be helpful!
Or perhaps a better way of asking -- what do you reveal at what point?
For e.g., Pre-IoI - that a seller note will be required
IoI - Seller note as part of consideration (is it advisable to mention percentage of note, interest rate, forgivable vs. not here?)
LoI - Lay out the details: percentage, forgivable/not forgivable, rate etc. Do you leave anything out here for future negotiation?
I'm asking from the lens of not wasting anyone's (including my!) time on a deal where terms were never going to be accepted; but also cognizant that showing all cards at once (or at IoI) could make you look less viable than someone else, who is simply planning to negotiate this later! Also in the interest of avoiding deals falling apart later.
Any insight here into what's "typical", or what people are doing will be helpful!
from Massachusetts Institute of Technology in Boston, MA, USA
If you are trying to suss out that whether a particular seller would be amenable to a seller note prior to any formal IOI or LOI submission, in your early conversation, perhaps just your first one, you can verbally mention something along the lines... that "the capital structure I'll present is going to include a minority seller note" furthermore, if the seller is curious what level it would be you can give a range.... plus also mention that this is within market etc....
Generally in the IOI and LOI, you would want the seller note to be well crafted out....amount term amortization interest rate balloon payment frequency standby etc... also that is junior to any senior debt... just think of it from a sellers perspective... they want to know - what will they get paid when -
Trying to leave it loose and not giving specifics on the IOI or LOI maybe a tactical option, but then the sellers very first question would be around the specifics...
in Falmouth, MA, USA