Three outcomes the LOI must secure
Exclusivity
30 to 45 days standard, 45 to 60 with financing or complexity, with extension language tied to seller cooperation so they cannot slow-walk while your clock burns.
Structural protection
Terms that reflect the real risks you found in validation, not boilerplate.
Clear deliverables with deadlines
"Seller will cooperate with diligence" is not a deliverable. If the seller will not commit to all three, you have a time sink, not a deal.
Six elements, three to six pages
Price and structure
Anchored to implied EBITDA, with the working-capital mechanism named.
Exclusivity and diligence scope
The period, plus the Tier 2 financials and the operational deliverables list.
Conditions precedent
Satisfactory diligence, a material-adverse-change clause, internal approval, and financing, each tied to a concrete example.
Transition and binding clarity
Responsibilities, weekly hours, pay, and duration. Economics non-binding; exclusivity and confidentiality binding.
What stays out
Detailed reps and warranties, indemnification mechanics, and retention agreements. Negotiating those now means arguing over unknowns and giving early concessions.
Frame price to match certainty
Multiple-based
One clean number when earnings are well-supported.
Range-based
When a few items could move value; it narrows after diligence plus the working-capital adjustment.
Base-plus-earnout
Cash at close plus upside tied to the specific risk you are protecting against. If the deal only works at a high multiple on perfect assumptions, do not force the multiple approach.
The working-capital peg, and how to negotiate
The peg
Working capital is current assets minus current liabilities; the peg is the normal level needed to operate, set as a seasonally adjusted trailing average. At close the price adjusts dollar-for-dollar against actual working capital.
Why it matters
It stops a seller from draining cash, slowing collections, or stretching payables right before close. Establish the methodology in the LOI; finalize the amount in diligence.
Run it as three conversations
Presentation (walk the logic, then send the LOI), negotiation (let them talk first, handle the predictable pushbacks), and closing (restate, confirm exclusivity start and deliverables, execute same day).
Sale Preparation Checklist
See what a prepared seller looks like before you draft the LOI.
Name the risk in the LOI
Tie structure to the risks you found so the seller cannot call a later adjustment a retrade. The five ways buyers blow up an LOI are over-complication, an indefensible number, impossible timelines, a vague transition, and pretending the risks are not there.
This course is operational guidance, not investment, legal, tax, or financial advice. SilverShore Partners is not a registered broker-dealer or investment adviser; in qualifying private-company transactions we may operate within the federal M&A broker exemption under Section 15(b)(13) of the Securities Exchange Act. Confirm specifics with your own advisors.