How to Negotiate the Most Important Clauses in your LOI

About the Episode

One of the biggest mistakes you can make when selling your business is not negotiating the letter of intent (LOI). Join M&A Attorneys Mital Makadia and David Siegel while we discuss your negotiating leverage, common mistakes, and problematic clauses in the LOI.

The most leverage you’re going to have as a seller is at the beginning of the LOI, and you want to make sure that you get the terms in there that you want. If you’re putting off that hard discussion on escrow or indemnity or acceleration for any of your equity, things like that, those terms aren’t going to get better later.

Mittal Makadia and David Siegel

What You’ll Learn

• Negotiate Key Terms Early: The most leverage a seller has is at the LOI stage. Important terms like indemnity, holdbacks, and employment should be negotiated upfront, as they rarely improve later in the process.
• Always Consult Legal Counsel: Sellers often make the mistake of signing an LOI without consulting a lawyer. Even if the LOI is “non-binding,” its terms set the tone for the rest of the negotiation and can have binding elements.
• Be Strategic with Exclusivity Clauses: Exclusivity provisions can limit a seller’s ability to consider other offers and may require sharing details of competing offers. Avoid open-ended exclusivity and negotiate for specific, reasonable terms.
• Don’t Fully Mark Up an LOI Before Economic Terms Are Set: Focus first on negotiating the numbers and economic terms before involving legal counsel to mark up the LOI. Fully marking up an LOI too early can signal weakness in negotiation.
• Prepare and Know Your BATNA: Sellers should determine their Best Alternative to a Negotiated Agreement (BATNA) before entering negotiations. This provides leverage and helps avoid agreeing to unfavorable terms out of desperation.

Topics Covered

Want More? Related Resources:

• M&A Basics | The Letter of Intent
• Negotiating the Letter of Intent
• The Role of M&A Lawyers When Selling Your Business

Meet Our Guest

Mital Makadia

Partner at Grellas Shah | Cupertino, California

Mital Makadia is a Partner at Grellas Shah, where she focuses on representing technology startups and startup founders. She provides counsel on a variety of corporate and transactional matters and negotiates and structures equity financing, M&A transactions and commercial and intellectual property transactions for her clients.

LinkedIn: https://www.linkedin.com/in/mital-gondha-makadia-11a87334/

Meet Our Guest

David Siegel

Partner at Grellas Shah | Santa Clara, California

A Partner at Grellas Shah, David Siegel is an unusual startup lawyer in having done sophisticated legal work in both transactional and litigation matters. He is an accomplished startup lawyer and litigator who has extensive experience in handling a broad range of corporate, transactional, and intellectual property matters, including work on multi-million dollar financing and acquisitions. This is all in addition to having a deep expertise in handling complex intellectual property, corporate and commercial litigation matters.

LinkedIn: https://www.linkedin.com/in/david-siegel-a271265/