What exclusivity in an LOI actually costs you
The moment you sign, your leverage shifts to the buyer. Here's how to price the risk.
When you sign a Letter of Intent (LOI) that includes an exclusivity provision—and they almost all do—you are making a significant concession. You are agreeing to take your business off the market, stop talking to other potential buyers, and spend the next 60 to 90 days opening your books to one party.
Buyers demand this because diligence is expensive. They don't want to spend $150,000 on lawyers and accountants only to have you sell to someone else. That is reasonable.
What is not reasonable is the assumption that this concession is free.
The moment you sign that exclusivity period, your leverage in the negotiation drops to near zero. Before the LOI, you had alternatives. During exclusivity, your only alternative is walking away entirely—a threat that becomes less credible every week as you sink your own money and emotional energy into closing this deal.
Buyers know this. It is the reason re-trading (when a buyer lowers their offer price during diligence) happens almost exclusively deep into the exclusivity period. They find a minor discrepancy, present it as a major risk, and ask for a price reduction. At day 75, with your employees wondering why strangers are in the building and your broker telling you to be reasonable, you are highly vulnerable to accepting a worse deal just to get it done.
If you are going to grant exclusivity, you need to price that risk. That means tighter language around the conditions under which exclusivity breaks. It means demanding evidence of financing before signing. And it means being mentally prepared to let the exclusivity period expire without signing an extension if the buyer is dragging their feet.
I sit with owners to review LOIs before they are signed. We look at the exclusivity period not as boilerplate, but as a defined period of risk that needs to be managed.