Solicitors for HoTs and Reimbursement clause?

by a searcher from KEDGE Business School

1 month ago

Hi there,

I'm at HoT stage with a seller.

They have now gotten their solicitor (non-M&A specialised) involved who is taking apart quite a lot of it.

I'm trying to remind everyone that this is just the HoT and most of it isn't legally binding, but am expecting that the solicitor will push back.

One major point is that he wants to remove the costs section, where we reciprocally agree to pay for the incurred DD costs if we retrieve from the deal during DD.

Any thoughts on this?
Have you involved a solicitor before being under exclusivity (ie to craft the HoTs)?
How have you dealt with the Cost reimbursement clause?

Thanks in advance.
F

0 likes
72 views
8 comments

professional from Lancaster University - Lancaster University Management School

Morning Florian, I will drop you an email.

4 weeks ago | like reply | 1 like

intermediary from University of Western Australia

It's normal for the sell-side lawyer to be involved at HoT stage but if they are not an M&A specialist it will lengthen negotiations - not just at this stage but in the purchase agreement negotiations. Their lawyer will be too conservative and won't know what is "market". Having said that, if the seller is not using a corporate lawyer with an M&A focus (ideally one who has specific experience in that particular industry), I would hazard a guess that they are not using a specialist investment banking (corporate finance) advisor either. Both of these factors will enable you as the buyer to get a much better deal, although you will have to be patient in negotiations.

The reimbursement clause is relatively unusual. However, changing it now (after it was agreed) is reopening negotiations on this point. You might want to reassess how much renegotiating you have patience for. It depends on the commercial terms and how much you want to do the deal.

1 month ago | like reply | 1 like

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Family office looking for traditional searchers

Investor seeking Self-Funded Search Deals

Downsides of "buying a job" below 750k+ EBITDA?

2 Best Ways To Find Motivated Sellers, Off-Market Deals

6-7x for a Self-funded Search Deal?

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.