How long should exclusivity last in an LOI, and what can I negotiate once I have signed one?

The letter of intent is mostly non-binding. Price, structure and timeline are statements of intent that either side can walk back. The exclusivity clause is different. It is one of the few provisions that binds you, and it changes your position the moment you sign.

What exclusivity does

Exclusivity, also called a no-shop, means you agree to negotiate only with this buyer for a set number of days. You cannot solicit or entertain other offers while the buyer runs diligence and drafts the purchase agreement. For the buyer, that protects the money it is about to spend on lawyers and accountants. For you, it is the day your other bidders stop being a real alternative.

How long it runs

Goodwin tracks this in its private equity deal database. In 2021, about 6 percent of deals with an exclusivity period ran 61 days or longer. In 2022, nearly 40 percent did, and most of those ran 76 days or longer. That is a 2022 data point covering PE buyers, so read it as direction, not as today's median. The direction is clear: when deal flow slows and buyers get more cautious, they ask for more time and they get it.

What to ask for

Length. Open at 30 to 45 days. A buyer that has done its homework on you does not need 90. Milestones. Tie every extension to something the buyer delivers, such as a first draft of the purchase agreement or written confirmation of financing. Time passing is not a reason to extend. An exit if the price moves. Ask that exclusivity ends at your option if the buyer proposes a lower price or materially worse terms. Existing conversations. Ask whether approaches you received before signing can be acknowledged. Have your lawyer draft this carefully.

What a re-trade looks like

A re-trade is a request to change the price, escrow, indemnity or earnout after the LOI is signed and exclusivity has started. Some are legitimate: diligence found a working capital shortfall, or a customer contract that is not what the data room said. Some are a buyer using the fact that you have nowhere else to go.

Before you answer, ask for the finding in writing and match it to a line in the LOI. If the LOI never fixed how the working capital peg is built or how large the escrow is, the buyer has room to reopen both. Pin those down before you sign. A common middle path is an escrow or a deferred payment tied to the specific issue, instead of a cut to the headline price.

Keep your alternative warm

You cannot start a new conversation once exclusivity begins. Before you sign, you can keep a second buyer informed, and you can decide the price below which you walk. Both cost nothing on day one and are close to impossible on day 40.

Related reading: what a letter of intent should lock down, how to negotiate a software company acquisition, how to structure an earnout that pays, what due diligence finds, and whether you need a banker.