Don't Be Coy With a Letter of Intent
I recently worked on a deal where the prospective seller over-strategized the letter of intent. The seller wanted my client to sign a non-binding LOI that contained about half of what should have been included in the letter. It was extremely frustrating and ultimately was a waste of time, because rather than acquiesce to the seller’s demands, my client walked away from the deal.
While the LOI was “non-binding” in every way (and the seller kept repeating that), that wasn’t reason enough for my client to proceed. Basically, my client didn’t want to push forward without knowing more terms. And I can’t blame him. Why start the acquisition process without sufficient knowledge of basic terms?
I assume the seller was either not that serious about selling or is trying to gauge a potential buyer’s interest, but either way you run the risk of alienating potential buyers.
About the Author
Ryan Roberts is a startup lawyer and represents technology companies through all phases of the startup process, including incorporation, seed & venture financings, and exit transactions. Click here to learn more about his practice.
