Thoughts on multiple LOIs?

searcher profile

May 21, 2020

by a searcher in Los Angeles, CA, USA

How are folks thinking about presenting LOIs to multiple parties at the same time? Perhaps there can be a primarily deal and a slow (and cheap) due-diligence on secondary deals. The basic thought would be to drag feet on the secondary deals until the primary deal closes or falls through. What are the operational and ethical issues with this?

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commentor profile
Reply by an investor
from University of Pennsylvania in Charlotte, NC, USA
I see this is an old post but perhaps it's been bumped.At any rate, I too an interested in accessing the link that ^redacted‌ shared..

However, I agree 100% with ^redacted‌.An LOI - as that term in properly used - is a statement of bona fide intention to complete the transaction on the terms agreed upon (in the LOI) provided that due diligence does not uncover legitimate issues that would render closing not viable.Normally an LOI would have an exclusivity provision with a specified term.Obviously the seller grants exclusivity with the understanding and expectation that buyer will proceed expeditiously to complete due diligence in that time period.Intentional foot dragging is bad faith dealing in these circumstances.As a practical matter, it's hard to imagine that a seller would tolerate this practice, and highly unlikely that the deal would proceed to closing.
commentor profile
Reply by an intermediary
from Wake Forest University in Winston-Salem, NC, USA
If the buyer does not have the ability and the intention to close both, I would put this clearly in the unethical category, especially if the buyer asked for any sort of exclusivity from the seller. Furthermore, when this is discovered it will sour the buyer's name and reputation in the deal community. Our LOI specifically addresses this. To put it colloquially, it would be like being engaged to two fiance(e)s at the same time.
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