[kresten]

You’d be crazy to guarantee exclusivity when negotiating sale of your company.

It would make more sense to give an absolute assurance that you’re talking to all possible buyers and that the potential buyer should understand that you might easily sell at any moment.

Exclusive negotiation is the precise opposite of a good approach.

Indeed implying that there are other negotiating parties is almost an essential component of any such negotiation.

[trentnix]

The LOI, at least the ones I've read, prevents you from discussing sale opportunities with anyone else. It's called a "no shop" clause.

Before the LOI? Go crazy.

[kresten]

I’d rather not do the deal than have a no shop clause.

A no shop clause destroys so much deal leverage. I can see why the buyer would want it.

In fact a no shop clause is indistinguishable from an exclusivity agreement.

If the buyer absolutely required it I’d put a hefty non refundable price on it, probably 50% of deal value. Such a commitment has to work both ways.

[mlyle]

As others say, once you reach the point of a letter of intent-- there's no way a buyer wants you carrying their LOI around to everyone in the world trying to get a better offer while the buyer is committing resources trying to get the deal done.

It's reasonable to expect a ("reverse") break-up fee, but it is not likely to be half the deal value.

[kresten]

Maybe a no shop clause should have a tight time to live.... “ok we commit but only if you put the money in our account within seven days, after that shopping is ok”

[mlyle]

Deals take a lot longer than 7 days to close-- especially real acquisitions, but even asset purchases usually take months.

[thethimble]

There's a lot of misconceptions here around how corporate acquisitions work. Here's typically how things work in practice when companies are sold:

- Seller attempts to garner interest, sometimes facilitated by an investment bank.

- Buyers indicate interest informally, eventually culminating in a Letter of Intent (LOI) from each buyer indicating a price and other important factors related to a deal.

- A cricitical component of the LOI is an exclusivity period - a duration of time where the buyer is able to conduct due diligence in exclusivity. It's clearly in the best interest of the seller to minimize the duration of the exclusivity period.

- Discoveries in the exclusivity period are typically grounds for renegotiation. Vulture buyers typically crush sellers and completely renegotiate a deal in this period banking on the fact that the seller has no alternatives post exclusivity. Good buyers know their reputation is at stake if they renegotiate an LOI and will only do so if material things show up in diligence (reasonably common).

- The LOI is not an obligation to purchase. Mostly the buyer is putting their reputation on the line.

- Earnest money is extremely rare in corporate acquisitions because the buyer universe is sufficiently small such that reputation is a sufficient motivator for good behavior. That said, anything is negotiable and you can go against tradition at any point if you have enough leverage (interested buyers).

[kenneth]

Good luck finding a counterparty that won't ask for a no shop clause. As a VC all our term sheets have legally binding no shop and confidentiality clauses. That's industry standard.

[Seufman]

No shop clauses are normal -- no serious buyer would move forward with diligence without it

[trentnix]

And that's certainly your prerogative. Your preferences aside, a "no shop" clause is the norm.

[grdeken]

This is wishful thinking at best.

[Shpigford]

For better or worse, exclusivity in an LOI is the norm. Obviously, you don't have to accept the LOI, but any LOI that is missing exclusivity is usually a sign of inexperience and honestly is cause for concern.