Should I let seller not respond to my LOI?

So, a bit of a strange situation (for me at least) …

I submitted an LOI on a business that is almost certainly “above market” that included both cash and an earnout. To give you some context, the business seems to have generated about $450k/year in cash flows for the last several years on about $8 million/year in revenue. I offered $2.575 million in cash because I believe the $450k could be quite a bit higher if the business were managed differently. I also think there is a considerable growth opportunity. The earnout was a five year deal that would pay the seller 50% of any cash flows above $750k/year with a max payment of $125k/year for a potential of $625k.

The seller didn’t respond to my LOI other than to say that they wanted to “discuss internally” what type of savings they thought they could generate by making changes themselves. They have a few ideas of things they can do, so they wanted to meet and get back to me later once they got more comfortable with the potential. I offered to try to incorporate them into the LOI before they met so we could keep the deal moving. I did by increasing the price by $150k and I by increasing the earnout to $850k, but spread it over 10 years instead of 5 (start paying 50% of anything above $800k up to a max annual payment of $85k). I also put a contingency in the LOI that they needed to “prove” that the savings could be generated without hurting customer satisfaction.

I heard back today that they still want to have a meeting with the management team in about two weeks and the owner wants to convey their plans via a call this week (so they are still not ready to respond). I’m wondering what to do?

As I mentioned, I think my offer is more than fair (though I guess that is obviously an opinion of one). I tried to ask the broker what the owner is looking to accomplish, and he either could not or would not tell me. I think one of a few things is happening:

- the seller may have unreasonable expectations and may not be willing to sell unless the price is much higher than I will be able to support.
- the seller may want to know the likelihood they’ll get paid on the earnout, so they need to discuss with the management team before they can agree to anything.
- there may be another buyer that is either not moving as quickly as I am or has just entered the picture, so they don’t want to say yes to me in case another buyer is willing to pay more.

I suppose there could be other things, but these seem the most likely to me. I’d be curious if others think I should walk? Wait it out and continue to honor the LOI? Wait it out but don’t honor the LOI (it had/has an “expiration date” tied to it)? Something else?

Thanks for your consideration and help!