OnwardLearn · Selling · Step 8. Agree on the terms
What you're agreeing to when you sign, including exclusivity
The short version
- Signing a [letter of intent](/learn/reference#letter-of-intent "The offer document. It sets out the price, the structure and the main terms, and starts diligence.") commits you to a few binding terms, even though most of it is not binding.
- Exclusivity is the most important. It means you stop talking with other buyers for a set period.
- Keep exclusivity as short as the buyer can reasonably live with, and tie it to progress.
- Know what happens if the buyer walks away, and what happens if you do.
- Have your M&A attorney review the letter before you sign.
Exclusivity
Exclusivity, sometimes called a no-shop clause, means that for a set period you agree not to market the business, talk with other buyers or accept another offer.
Buyers ask for it because they are about to spend real money on attorneys, accountants and lender fees. They want to know you will not sell to someone else while they do.
For you, it is the moment you lose your other options. Once you agree, you cannot use another buyer's interest to hold your price.
Negotiating exclusivity
- Keep the period short enough to keep the buyer moving, and long enough for their lender to do its work.
- Tie it to milestones. For example, the buyer's lender must issue a commitment by a certain date, or exclusivity ends.
- Allow an extension only by written agreement.
- Make the end clear. When exclusivity ends, you are free to talk with others.
Other binding terms
- Confidentiality. The buyer keeps what they learn private, and returns or destroys it if the sale falls through.
- Costs. Each side usually pays its own attorneys and advisors.
- No contact. The buyer does not contact your employees, customers or suppliers without your permission.
- Deposit, if any. Some buyers put down a deposit. Know when it is refundable and when it is not.
What is not binding
The price, the structure and most other terms can still change. If due diligence turns up something new, the buyer may ask to lower the price. Lesson 9.4 covers what to do then.
Before you sign
Read the letter with your M&A attorney. Make sure you understand what you are giving up, for how long and what happens if either side walks away.
Take this to your own people
The questions for this topic, for your attorney, your accountant or your lender.
- For your M&A attorney: "How long is the exclusivity period, and is it tied to anything the buyer has to do?" Listen for: a specific length and milestones, such as a lender commitment by a set date.
- For your M&A attorney: "What happens if the buyer walks away, and what happens if I do?" Listen for: what each side owes, including any deposit and any costs.
- For a lender: "How long does your review usually take for a purchase like this?" Listen for: a realistic timeline, so the exclusivity period matches it.
This names the question. Your CPA, your M&A attorney and your lender answer it for your situation.
When you’re ready
How a sale actually happens, in plain language — before you decide anything. Make a free account — nothing is shared