Comments on: The Lowly Letter of Intent

By: JLM

JLM — Wed, 04 Feb 2015 17:48:00 +0000

In reply to David Semeria.

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Regards to Italy! Thx for checking in.

BRC
http://www.themusingsofthebigredcar.com

By: David Semeria

David Semeria — Wed, 04 Feb 2015 17:13:00 +0000

Well played JLM

By: JLM

JLM — Wed, 04 Feb 2015 15:17:00 +0000

In reply to jim mchugh.

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As a savvy business pro your comments are more than simple validation.

The LOI has to conform to the personalities of the parties involved — and their character.

Good LOIs start general and become specific. Crawl, walk, run.

The engagement created by batting the LOI back and forth is both a few touches of the 5-7 touch process but it is also “skin in the game” and creates a more virulent commitment.

Well played.

BRC
http://www.themusingsofthebigredcar.com

By: jim mchugh

jim mchugh — Wed, 04 Feb 2015 15:07:00 +0000

Somewhat timely discussion…I was on a conference call this morning with a client CEO (and others) discussing an Investment Banking agreement he is evaluating for the sale of his company. We did not get into the whole sale process, but the LOI in my opinion is an essential aspect of the negotiation between the buyer and seller. I have read, reviewed and help draft many of them. I tend to favor ones with more specifics than generalities. If the LOI is too general, the ‘terms’ that end up in the Purchase Agreement may be far different than what was expected. In one situation, the strategic buyer we were dealing with was such a pain, the LOI we settled on was essentially the outline of the purchase agreement (and this did expedite the overall legal process).

By: JLM

JLM — Wed, 04 Feb 2015 13:32:00 +0000

In reply to Kevin Donovan.

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Sometimes in business, we start with the complex because business has become progressively more complex.

The art of making a deal really hasn’t changed much. It’s still who, what, when, where, why, how much — and the character of the person on the other side of the table.

Not only is a good letter of intent simple, it projects a sense of competence while defining the playing field upon which the negotiations were going to take place.

It also saves a lot of time. I cannot tell you the number of times that a good LOI had told me — “not going to happen”.

Do not despair. Those earlier years are just tuition, Kevin.

BRC
http://www.themusingsofthebigredcar.com

By: Kevin Donovan

Kevin Donovan — Wed, 04 Feb 2015 13:26:00 +0000

In reply to JLM.

You helped me think this morning. When I look back on agreements that went bad it was because I didn’t understand the critical issues well enough. The critical issues remained hidden.

I like this approach for two reasons.

1. It puts issues on the table where they are visible to everyone
2. It established credibility of character

Thanks for the lesson. If I only read this a few years ago….

By: JLM

JLM — Wed, 04 Feb 2015 11:48:00 +0000

In reply to pointsnfigures.

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Having done it hundreds of times, I can tell you unequivocally it works and saves money in legal fees.

It is also a great way to smoke out the real issues in a potentially difficult negotiation. If it isn’t in the letter of intent, it is not likely important to the other party.

Any agreement is only as good as the character of the people involved.

A letter of intent — a prelude to a final agreement typically — is subtly different than a memorandum of understanding which is typically more of an operating agreement.

BRC
http://www.themusingsofthebigredcar.com

By: pointsnfigures

pointsnfigures — Wed, 04 Feb 2015 11:31:00 +0000

interesting. when I was on the board of CME we used to enter into Mutual Letters of Understanding with other exchanges all the time. That was in the days pre mergers, and pre demutualizaton when every exchange was parrying for strategic position. I found them not worth the paper they were printed on. Your factset is far different; would be interesting to see if actually negotiating and writing a non-binding legal doc prior to getting it to the attorneys would be worth the time and effort of doing. Certainly, you are going to have discussions, emails etc prior so maybe it’s worth it.

By: JLM

JLM — Wed, 04 Feb 2015 11:30:00 +0000

A good letter of intent can accelerate the resolution of important decisions in startups and small businesses. It is an obvious statement of who, what, where, why, when and how much.

http://themusingsofthebigredcar.com/the-lowly-letter-of-intent/

It is the beginning of a negotiation. Treat it as such.

BRC
http://www.themusingsofthebigredcar.com