tptacek was referring to mandatory legal protections.
Typically, those are only created for unsophisticated parties who don't know what to negotiate for.
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If I’m going to put my business on hold for 3 months
I've had a failed LOI before (as a seller). Very rarely should an LOI ever fail after 3 months of exclusivity.
The LOI is "hey we'd like to dig deep into this, but we want to be sure we aren't wasting our time." Competent parties shouldn't take much more than a month to figure out whether it works or not. (Funding logistics, or SEC approvals, etc can stretch that out.)
I’ve anecdotally heard of sellers being strategically strung along to distract them/tie them up, to help their portfolio company get additional market traction.
This is by some less than ethical Chinese investors.
That said; it could also be (unsuccessful) sellers remorse.
Absolutely. You can get squeezed by a potential buyer. You're exposing your books, and if the buyer is particularly shrewd, it can manifest a very unfavorable position, especially for small companies. They squeeze, back out, and come back in 6 months if you're still around. If you're looking to sell your company, you need to know this and set up milestones to mitigate this.
Comments
tptacek was referring to mandatory legal protections.
Typically, those are only created for unsophisticated parties who don't know what to negotiate for.
---
I've had a failed LOI before (as a seller). Very rarely should an LOI ever fail after 3 months of exclusivity.
The LOI is "hey we'd like to dig deep into this, but we want to be sure we aren't wasting our time." Competent parties shouldn't take much more than a month to figure out whether it works or not. (Funding logistics, or SEC approvals, etc can stretch that out.)
I’ve anecdotally heard of sellers being strategically strung along to distract them/tie them up, to help their portfolio company get additional market traction.
This is by some less than ethical Chinese investors.
That said; it could also be (unsuccessful) sellers remorse.
Absolutely. You can get squeezed by a potential buyer. You're exposing your books, and if the buyer is particularly shrewd, it can manifest a very unfavorable position, especially for small companies. They squeeze, back out, and come back in 6 months if you're still around. If you're looking to sell your company, you need to know this and set up milestones to mitigate this.
Acquisition by competitor is a quite dicey affair...beyond a concern for resources, the information transfer itself is also concerning.
Yup. Also a common situation.