Should You Prolong M&A Exclusivity?
If Buyer is unable to close the M&A deal in the time the letter of intent (LOI) allots, you as Seller should confer with your advisors to determine whether Buyer is having problems that may compromise the deal. For example, Buyer may be stalling for time because she doesn’t yet have the money lined up.
If you and your advisors believe Buyer isn’t able to close the deal, you may be better off refusing to grant her continued exclusivity. If you think Buyer is stalling, informing her that you’ll begin to talk with the other interested parties is often a good technique to get her to wrap up the deal and close.
However, before refusing to extend exclusivity, consider whether your own actions caused or contributed to the delay. Have you released information in a timely manner? If you’ve been slow in providing Buyer with needed due diligence information, you’re partially responsible for her slow pace and should take that into account when evaluating the situation.
If you do decline to grant Buyer an extension of exclusivity, you shouldn’t actually tell her that you don’t want to do a deal. Never shut a door and walk away.
If the situation is seemingly untenable, let the other side be the one to close that door. You never know whether that other side will eventually see your point of view and come around to your position, so give yourself a chance at closing a deal.
Buyers, do your work quickly and push as hard as possible to close the deal within 60 days. Based on the situation, Seller may not decide to extend exclusivity if you need more time and may instead reengage conversation with other interested parties.