An unsolicited LOI arrives, by mail or by email, from a buyer the founder did not solicit. The founder has 48 hours of decision before the buyer follows up. What to do, in what order.
First 48 hours
Read the LOI carefully. Note the headline price, the structure (cash, stock, earnout components), the working capital target, the exclusivity period, and the diligence timeline. Do not respond yet.
Calculate the implied multiple on your trailing twelve months EBITDA, on the headline price and on the price assuming the earnout fully achieves. Compare to the empirical range for your sector and size, from Pratt’s Stats, the Capstone index, or a recent sell-side advisor conversation.
Do not call your CPA or your lawyer first. The most common piece of bad advice founders receive at this point comes from their general business advisors, who are not transaction-trained. Their instinct will be to ignore the LOI or to negotiate it themselves. Both are wrong.
Call one (1) of three (3) people: a senior partner at a lower-middle-market M&A advisory firm, an experienced M&A counsel, or a peer founder who has sold a comparable business in the last three years. Have one 30-minute conversation. Describe the LOI; ask for an honest read.
First week
Take the meeting the buyer is requesting. The meeting is cheap. The information is high-value. Sign a mutual non-disclosure agreement before the meeting; this is standard and the buyer will expect it.
In the meeting, listen. Ask the buyer how they identified your business, what their thesis is, what they would pay for in a business like yours, and what the deal structure they are proposing actually looks like. Do not negotiate. Do not commit to anything. The point of the meeting is to gather information.
After the meeting, engage a banker. The unsolicited LOI is now real enough that you need professional representation if you intend to engage further. The banker’s role is to introduce competition into the process, which is the only mechanism by which you achieve a better outcome than the buyer’s opening number.
The banker engagement letter typically commits you for 12 to 18 months. The fee structure is a Lehman scale or modified Lehman, typically in the 1% to 3% range on transaction value. Engage the banker on the assumption that you might not transact; the optionality is what you are paying for.
First month
With the banker engaged, decide whether to run a real process or to engage with the original buyer on a one-on-one basis. The banker’s advice will usually be to run at least a limited process; the empirical record favors them.
If you run a process, the timeline is roughly: four to six weeks for the banker to prepare materials (teaser, CIM, financial model), four to six weeks of outreach and initial meetings, two to four weeks of bid management, two to four weeks of best-and-final, and then exclusivity with the winning bidder. Total elapsed time from LOI to definitive agreement is typically four to seven months.
If you negotiate one-on-one with the original buyer, the elapsed time can be shorter (two to four months from LOI to definitive), but the price is usually lower because the buyer is not disciplined by competition. The trade-off is real and the right answer depends on your specific situation; the banker will help you make it.
When to walk
Three reasons to walk away from the process, even after initial engagement:
The buyer’s diligence is unreasonable in scope or aggression in a way that suggests they will be a difficult counterparty post-close (the diligence process is a credible sample of what the relationship will be like).
The buyer’s pricing model is materially different from your sense of the empirical range, after the diligence process. If the buyer drops their number 30%+ from the LOI after diligence, the diligence has surfaced real issues, and the right move is usually to walk, fix the issues, and re-engage 18 to 24 months later.
The buyer’s behavioral pattern (changes in deal team, repeated re-trading of agreed terms, slow response on basic questions) suggests the deal will not close on the timeline they have committed to. The right move here is to call the question early rather than spend another three months in a process that is going to fail.
Walking away after the LOI is expensive in advisor fees and operating attention, but it is recoverable. Closing a deal that does not work is not.
What to read
Foundry’s piece on inbound LOIs, When a strategic walks in cold, covers a specific case study of an unsolicited LOI that became a successful transaction. The piece on the False Summit covers what diligence typically finds in week seven. The Misalignment Tax monograph covers the full five-axes preparation work that determines whether you should engage with the LOI at all, or fix the underlying issues first and come back later.
The Cordis MRI is the way to find out, quickly and structurally, whether you should engage with the LOI in front of you or do the work first. Either answer is valid. The MRI is built to surface the right answer, not to push you toward one or the other.
The Cordis MRI is the diagnostic engagement that often follows a playbook moment. Begin the intake when you are ready.
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