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Session #8: Offer Diplomacy
Seven tips to get your LOI accepted in a crowded marketplace
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You’ve made several offers but keep coming in second place.
In today’s session, our goal is to help you master the art of crafting and presenting an LOI that does more than just get you noticed—it makes you memorable.
To do that, we’re going to keep this session simple, with a straight-to-the-point list of seven ways to improve your LOI’s chances.
Thanks for tuning in to the 8th Session of this Business Buying Masterclass!
Did you know that Kevin and Eric have launched a new podcast called Mundane Millionaires?
Each week, we publish and audio and video podcast of interviews with incredible entrepreneurs just like you who building time and financial wealth as entrepreneurs.
This week, we sat down with John Seiffer, an experienced small business advisor and the Founder of CEO Boot Camp. John has over 40 years of small business experiencing, from founding a company of his own to working with hundreds of small business owners as an advisor.
A Love Letter
Establishing a personal connection with the seller can make an offer more appealing.
This could be through a heartfelt letter to the seller, expressing your genuine interest in the asset, appreciation for its value, and the promise to uphold their legacy.
Connecting over shared interests or demonstrating a deep understanding of the industry can also make the letter more compelling.
Proof of Funds
Showcasing trustworthiness and instilling confidence is essential to stand out.
The number one fear a seller will have through the entire deal process is that a buyer is going to back out of a deal after substantial time and expense has been invested.
Lack of financial resources and the inability to obtain financing (debt or equity) is one of the primary reasons a buyer may back away from a deal.
Providing clear evidence of financial capability, which may include a preapproval letter from an SBA lender, equity commitments from investors, and proof of personal financial resources, such as screenshots of bank balances or additional backup funds, not only assures the seller of your ability to make the purchase, but also establishes you as a serious, reliable buyer.
Reduction in Contingencies
Making your offer as straightforward and easy as possible can help you stand out.
This includes reducing the number of contingencies in the offer, like removing financing clauses if you're prepared to pay in cash. By limiting unnecessary contingencies, you increase the certainty of the deal closing and can save both parties considerable time.
While it’s easy to get caught up in reducing contingencies to improve your chances of winning the deal, be careful not to overpromise what you can realistically deliver.
For example, if you cannot close the deal without adequate debt or equity financing place, make sure to state that contingency clearly.
The last thing you want to do is signal to a seller that you’re prepared to close with cash, only to slow roll what seller expects to be a quick process - or worse, walk away from the deal - because you don’t have adequate financing in place.
Being prepared, acting quickly, and remaining responsive can make your offer more attractive.
Having done your research, knowing the market well, and being ready to make a fast offer could give you a significant edge.
Speed also extends to payments, with immediate compensation for associated professionals like brokers or inspectors adding to the allure of your offer.
Remember our mantra: Time kills deals. Be decisive and move quickly and you’ll increase your chance of winning.
A Clean Offer
Notwithstanding the preceding section on speed, ensuring your offer is error-free and detailed is crucial.
Paying meticulous attention to the names, addresses, numbers, and dates in the offer document reflects your professionalism and seriousness, increasing the seller's confidence in your offer.
More than just these details, paying attention to the terms of your offer is perhaps even more crucial. We can’t count the number of times we’ve had potential clients approach us with signed LOIs that are structured as an asset acquisition but refer repeatedly to an equity acquisition.
Or worse yet, that have directly contradictory terms.
It’s easy to rush an offer out in order to appear fast and committed.
But do you know what sellers hate even more than slow buyers? Sloppy buyers!
Take the time to craft a clean, well organized and thoughtful offer and your LOI may jump to the front of the stack!
In addition to offering a competitive price, including incentives can make your offer more enticing.
This could be in the form of tips for inspectors, immediate payments for lawyers or brokers, or unique personal gestures tailored to the seller's interests.
Even a little bit goes a long way, so look for ways to sweeten the pot in a way that doesn’t jeopardize your financial model, and that modest investment may reap exponential dividends on the path to closing.
Deliver in Person
Personal delivery of the offer can enhance the trust and connection between buyer and seller.
Handing over a well-organized, bound offer packet in person and taking the opportunity to establish rapport with the seller can underscore your commitment and dedication, making your offer stand out in a crowded market.
Now for a few required disclaimers. Sorry in advance!
This course is being presented strictly for educational and informational purposes, and not for the purpose of marketing any legal services or seeking legal employment and is not motivated by pecuniary gain.
The opinions stated in this course from the authors represent the opinions of such individual author and not the opinions of any other person or organization.
Nothing contained in this course or otherwise from the authors hereof is to be interpreted as legal, financial, tax, investment and/or any other form of advice. Please consult your own legal, financial, tax, investment and/or other advisors.
The authors are not your lawyer, and no information provided in the course of this class or otherwise has the affect of forming an attorney-client relationship between you and the authors. In short, get your own lawyer!
This course is being presented by The SMB Center LLC and has no affiliation or relationship SMB Law Group LLP.
About the Authors
The authors have worked for some of the most elite law firms in the world.
During their time in BigLaw, they regularly worked on transactions in the hundreds of millions to billion dollar plus range for some of the most recognizable companies in the world and have extensive experience with M&A.
The authors have since begun investing in select SMB acquisitions and have co-founded an SMB-focused law firm where they’ve collectively worked on hundreds of millions of dollars in SMB-focused M&A.