A founder loses most of the points in a sale one at a time, during the weeks between the letter of intent and the signature. The buyer’s team asks for a longer escrow period, a lower working capital peg, an extra year on the founder’s employment agreement, or two more weeks of exclusivity. The founder agrees to each request in order to keep the deal on schedule, and treats the sequence as the ordinary cost of closing.
The buyer’s team reads the same sequence as a set of results, because a corporate development group at an active acquirer runs several transactions a year. Its lawyers and diligence leads measure their own performance by what they recover after the headline price is set. When the founder gives a point without asking for anything in return, the team records the outcome and raises its target for the next request. By the fourth or fifth request the founder has established a pattern, and the buyer’s closing list reflects that pattern rather than the letter of intent.
A prepared seller treats every request as an exchange and answers each ask with a counter of equal weight. A buyer who wants the escrow period extended from 12 months to 18 can have the extension in return for a lower escrow percentage or a shorter survival period on the general representations. When the buyer wants to move the working capital peg, the seller can agree to the new figure in return for a collar that limits the adjustment in both directions. The seller can grant a longer retention term in return for acceleration of the retention payment on termination without cause. A buyer who wants more exclusivity can have two more weeks in return for a written list of the open diligence items and a dated closing schedule.
The buyer’s deal team changes its behavior once each request carries a cost, and stops asking for points it does not need. The committee behind the deal team sees a seller who can still walk, and a founder negotiating with one buyer holds no other alternative. The founder never has to say no, and in our experience a buyer that receives a counter to every ask shortens its list rather than escalating.
By the time the buyer’s requests arrive, the founder has spent weeks planning for the period after the closing and prices every give against the risk of a delay. The founder fears losing the deal more than the buyer fears losing the asset at that point, and accepts each give as the cheaper option. An advisor who has sold their own company has sat in that position and recognizes the moment when the founder starts giving. Hemisphere keeps a ledger of every request and every give from the letter of intent through the closing, and prices each give before the founder responds.
Buyers make most of their requests after the LOI, so Hemisphere stays in the process through the closing rather than leaving the file with counsel once the letter is signed.