Selling Your Florida Business? You Hold the Leverage in the Letter of Intent Stage

For Florida business owners looking to sell their business, it’s important to understand the various stages of a deal and where your leverage lies. The truth is that, in most mergers and acquisitions (M&A), leverage shifts from party to party depending on where you are at in the deal.

For the initial stages of a negotiation, the letter of intent stage, the seller holds the leverage. You are at a vital point in the transaction even if nothing is being finalized yet, so it’s important to work with a business attorney who understands these deals and is equipped to assist you in using leverage to your advantage.

What is a Letter of Intent in an M&A Negotiation?

A letter of intent is one of the initial formal stages in a negotiation that legally ties you to the intended buyer. To this point, you and the interested parties have already taken the time to market and gather information. When you receive a letter of intent from an interested buyer, it’s important to consult with an attorney before signing anything.

The letter of intent itself is a document that states, on the record:

  • A buyer’s intent to buy the company
  • The buyer’s offered purchase price and financing of the deal
  • Any additional terms or conditions of the sale
  • A non-disclosure agreement for both sides generally applied to the remainder of negotiations
  • Other restrictive covenants that may apply such as a non-compete, non-solicitation, or anti-raiding clause
  • Timeline for due diligence and closing of the deal

Each of these elements is important but will take on varying terminology depending on the industry, value, and circumstances of the deal in question.

Avoid Disclosing Too Much Information as a Seller

Your leverage comes in the fact that a buyer or buyers have submitted a legally-binding agreement expressing their intent to purchase your business. They value what you are selling and you have no obligation to sell to them.

To preserve this leverage, it’s important not to disclose too much prior to signing your name onto the letter of intent. If you divulge too much vital information then a buyer with ill intent has the ability to simply walk away now equipped with more information that they obtained for free. This could be used to advance their own business in competition with yours or to lessen the value of your business in order to force a sale at a lower value.

Bring a Business Attorney on Board Early

The earlier you bring a business attorney into the negotiations the better protected you are. An experienced business attorney is not only capable of negotiating with interested parties but also spotting buyers with ill intent and vetting the terms of a deal.

At Bryant Taylor Law, we help Florida business owners get the most value out of their hard work by negotiating the terms of the letter of intent and ensuring the terms and conditions are legal, up-to-date, and reflect the reality of the deal. Contact our team early in your negotiations.

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