Many Founders rush to sign an unsolicited Letter of Intent (LOI) without getting legal or transactional advice. If you're a founder, don't be afraid to get professionals involved to protect your interests and potentially drive the price and terms toward more benefit for you. You won't chase away a serious buyer and you might be leaving a lot on the table by not negotiating before you sign the LOI.

It Only Gets Worse After You Sign the LOI: Why Founders Shouldn't Rush to Sign Without Legal Advice

If you're a founder thinking about selling your business, especially if a potential buyer has already reached out, it's vital to understand the importance of the Letter of Intent (LOI) in this process.

What is an LOI?

An LOI, or Letter of Intent, is the initial agreement that outlines the terms for a buyer's purchase of your business or a majority stake in it. This includes key details like upfront payments, structure (notes or equity), and future payments.

Why is the LOI Important?

While the LOI isn't legally binding, it plays a crucial role in the sale process by setting the tone for discussions and outlines the deal's framework. However, many founders may overlook the need for thorough LOI reviews and seasoned advice before signing. Typically, this is because they are aiming to keep a good relationship rapport with possible buyer instead.

Key Tips for Founders:

Negotiate Early: It's best to know what you will and won't agree to before signing the LOI, to make sure the terms work with your goals for selling and protect your future interests.

Seek Professional Assistance: Work with deal pros like M&A lawyers or investment banks to review and redline the LOI. This can offer clarity, reduction of risks, and safeguarding of your legacy.

Selling your business is a big decision, and the LOI stage requires careful consideration and strategic planning. Seek guidance and protect your interests throughout the process.