In January 2026, we presented a webinar titled “DO’s and DON’Ts of the LOI,” focusing on how letters of intent can impact a deal well before closing. We covered ways to gain a competitive edge while avoiding common pitfalls, along with key considerations around working capital and inventory, non-competes and key person risk, stock versus asset purchases, and licensing issues for trades businesses.
Question Timestamps
44:00: What do you see? Could you say more about kind of good faith—deposit earning, earnest money, deposit, breakup fees—anything where there is a financial penalty for a deal dying? How? Anything?
38:58: I don’t think we did—you guys mentioned IOIs in this presentation. Couple questions about IOIs—can you maybe just riff on them?
43:02: A couple people say they seem to have encountered requests for that in their searches. So I’ll just pick one in particular. Kristen says I was also asked to do an APA and an earnest money deposit. I’ve spoken with others who’ve experienced this. While you guys say it’s a don’t on the don’t list, it does feel common. So regardless, what’s the best way to seem like a strong buyer, but not do it—not play ball when asked for an earnest deposit?
48:20: What about the idea of including language where the seller will pay for the QoE and other diligence costs if the deal breaks? Idea being that the QoE that you’ve done they actually have is valuable to them, so they would get the QoE and maybe compensate you for something that they then get future value out of.
50:53: You referred to inventory and working capital separately, going back now to the inventory—to, excuse me, the working capital piece of the LOI. So you refer to inventory and working capital separately. Do you split them out in the LOI, or do you bucket inventory under working capital?
53:37: On another one, on networking capital from the bank here. So the questioner says we heard from Heather Anderson, who does webinars here, that most banks don’t like to finance networking capital as a cash injection to the business, but will finance it if it is purchased from the seller. And if they do finance it as cash—because if they do finance it as a cash injection to the business, it screws with ratios, approvals, etc. I vaguely remember Heather making that point. Does that—do you guys know anything about that?
55:24: As I recall, was it also something about banks perceiving that, if they, through the loan, are putting a lot of cash on the balance sheet, they feel like they’re also funding your deposit in some ways? You’re not—like, no?
56:13: I’ve noticed that most brokers ask for an APA directly, or first, instead of an LOI. Should we? Should these be the same, essentially, but with more contingencies—a fleshed-out LOI, essentially?
57:48: Great—going to the logic on the LOI, the purchase price and how, and showing the X and Y, the multiple and what that’s based on, the SDE or earnings—what’s that that’s based on? So that when the QoE comes back and it’s lower, and you lower your purchase price, your offered purchase price, it’s more palatable, and immediately there’s a rationale to it, in the mind of the seller, you hope. What happens if QoE comes back and it’s more?
1:00:17: Personal guarantees on seller notes?
1:01:37: If the LOI offer is significantly lower than the asking price, is it recommended to document the reasons in the LOI? Do you? Do you kind of lay out your thinking there?
1:03:10: Any idea what February’s is going to be? You want to tease it? I don’t remember—Bill’s the one who set the calendar.
If you need further assistance or are in the process of negotiating a letter of intent, contact us at info@barlowwilliams.law and we will be happy to discuss your situation.