Beware letter of intent traps
A common oversight by sellers in the M&A process, in their eagerness to get a buyer into the deal flow, is to sign a letter of intent without considering this a key part of the negotiation process.
These agreements might be nonbinding, but sellers need to realize that their bargaining power is greatest BEFORE they sign a term sheet. Once the term sheet has been signed, the leverage shifts over to the buyer, since letters of intent often include provisions relating to exclusivity. Treat these documents like they are legally binding on all terms and the extra effort will be rewarded as the deal progresses.
Some key terms in a letter of intent can include:
*Price and payment structure
*Scope and timeline of exclusivity provisions
*Conditions to be met or waived prior to the agreement becoming binding on the parties
*Decisions as to which terms are binding, which are nonbinding
Employee and benefits issues
The difficulty and sensitivity of these issues can vary across industries. For example, in the tech industry, you’ll typically see a number of highly important employees with complicated stock option plans. These potential issues are certainly worth paying attention to in the cannabis industry. These are some questions to consider: