In last week’s Deal Notes®, we discussed post-LOI buyer due diligence relating to legal structure. In today’s Deal Note®, I will address another aspect of buyer post-LOI diligence – integration planning.
Following the execution of a Letter of Intent, the exclusivity period with that one potential buyer begins. There are many phases during the exclusivity period. Typically, the most substantial phase is confirmatory due diligence, which is essentially the buyer confirming that the information provided during the pre-LOI process is accurate. As noted last week, another phase is evaluating the legal structure of the acquisition. Another phase of the exclusivity period is integration planning.
For the majority of deals we’ve advised during the past 25 years, there’s a moment during the exclusivity period when the buyer’s mentality shifts from the past to the future. This shift typically occurs after the buyer, and their professionals, have completed most of their confirmatory due diligence and have found no issues. At this point, the buyer begins to focus on integrating and managing the business after closing. Recognizing this shift can help you, as a seller, understand when the certainty of closing is increasing.
Alternatively, if the buyer is approaching the end of the exclusivity period and has not yet begun integration planning, then you, as a seller, should become increasingly concerned that the certainty of closing within the exclusivity period is rapidly declining. Seeing this early can help you decide if, or when, you might be willing to offer an extension of exclusivity, and under what terms.
Have a great day,
Ryan Kirby
Junior Partner
