Breaking It Down: The Third of the Ten Commandments of Business Acquisitions
Our Ten Commandments of Business Acquisitions has been so popular that we have decided to break it down. To briefly discuss each of the Ten Commandments and its import and impact.
The third commandment: "Obtain the exclusive right to negotiate ."
Even a well-crafted letter of intent might not entitle you, the prospective buyer, to much, but it should at a minimum entitle you to an exclusive right to negotiate for the purchase of the business for a period of time.
Moving forward with an acquisition will require significant investments of time and other resources (notably, money).
Because any business for sale will likely attract multiple potential buyers, those investments in proceeding with the acquisition process will be wasted if the seller ultimately decides to deal with another suitor.
Accordingly, a prospective buyer should protect him or her or itself by obtaining the exclusive right to negotiate with the owner/ seller as early as possible in the process.
Typically a seller/ owner will agree to negotiate exclusively with a prospective buyer for a limited period of time once the parties have reduced the material terms of the contemplated transaction to a letter of intent.