SMB PE Experts: The Essential Guide To The Letter Of Intent ("LOI") in M&A – Advice from a Lawyer

Summary
In this conversation, Eli Albrecht, a partner at Albrecht Law, discusses the intricacies of M&A transactions, focusing on the importance of the Letter of Intent (LOI) and its role in establishing the foundation for deals.

He explains the differences between an LOI and an Indication of Interest (IOI), the significance of exclusivity periods, and the key elements that should be included in an LOI.

Albrecht also shares insights on structuring acquisitions, the importance of working capital, and the role of escrows in M&A transactions.

In this conversation, Eli Albrecht and Dennis Unrein delve into the intricacies of M&A transactions, focusing on the importance of tax structuring, legal documentation, and the critical nature of non-compete agreements.

They discuss the necessity of having robust closing conditions, the role of landlords, and the significance of transition services post-closing.

The conversation emphasizes the need for seller accountability and the strategic use of Letters of Intent (LOIs) to ensure a smooth transaction process.

Takeaways
Good M&A lawyers are rare and valuable.
The LOI is crucial for setting deal foundations.
Exclusivity is key to securing a deal.
Understanding the difference between LOI and IOI is essential.
Reputation matters in the M&A community.
Structuring the deal correctly can save millions.
Working capital negotiations are critical in M&A.
Escrows are important for indemnifications and adjustments.
Personal connections can influence seller decisions.
A well-crafted LOI can differentiate buyers in competitive markets.
Tax - structuring can significantly impact M&A deals.
Legal documentation must be carefully controlled by the buyer.
Closing conditions are essential for successful transactions.
Landlords can have a veto right in M&A deals.
Non-compete agreements are critical to protect the buyer's interests.
Sellers often underestimate their importance post-closing.
Enforcement mechanisms are necessary to hold sellers accountable.
Transition services are vital for a smooth handover
The Letter of Intent should create urgency in negotiations
Dishonest sellers can lead to disastrous outcomes for buyers

Chapters
00:00 Introduction to M&A and Legal Considerations
02:51 Understanding the Letter of Intent (LOI)
05:55 Differences Between LOI and IOI
08:52 Navigating Exclusivity in M&A Transactions
12:01 Positive and Negative Aspects of LOIs
14:59 Key Elements of an LOI Template
18:08 Structuring the Acquisition: Asset vs. Equity
21:10 Working Capital and Escrow Considerations
34:22 Navigating Tax Issues in M&A Transactions
36:09 The Importance of Tax Structuring in Deals
37:30 Understanding Legal Documentation in M&A
39:51 Key Closing Conditions for Successful Transactions
43:48 The Role of Landlords in M&A Transactions
45:21 The Critical Nature of Non-Compete Agreements
50:13 Ensuring Seller Accountability Post-Closing
51:54 Transition Services: A Key Post-Closing Strategy
56:51 Finalizing the Letter of Intent (LOI)