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hi team in this video i want to tell you my favorite loi negotiation story it's probably the most entertaining anecdote i know in this context and it highlights how negotiating leverage shifts from the seller to the buyer the moment the loi is executed here's a helpful chart that shows negotiating leverage before the loi signed and after to understand why the shift in power takes place all you need to know is that the loi allows the buyer to secure an exclusivity period before the loi is signed the seller can talk to as many groups as they're willing to entertain and use this popularity to their advantage but working towards a close is expensive and time-consuming to give the buyer the comfort required to devote substantial resources to a process the exclusivity period prohibits the company from discussing a potential transaction with any other parties so as a seller you want to use this to your advantage before you sign the document and this one seller had the most creative approach i've ever heard of after exploring the universe of potential acquires he realized that there was really only one buyer whereas normally you might be entertaining offers from five to ten groups before signing in this case the seller realized only one was likely to present a real bid so as it relates to negotiating leverage he was technically in the same position regardless of whether or not the loi was signed but obviously he didn't want anyone else to know this so he looked at the universe of potential virus that had been represented in the confidential information memorandum and all of the cities listed for the respected headquarters of these entities and even though he knew that none of the other entities had a real interest in his company he booked flights to each of these cities and once he got to the city he would check into the hotel room turn on the tv and just wait and eventually his single buyer candidate or a third party representing this candidate would call his cell phone and again he would just wait and let it go to voicemail and then wait a little longer and finally call back from the hotel room phone if they didn't answer he'd leave a voicemail asking that they call him back sometimes he would leave the hotel's phone number but he also knew that they were probably checking their caller id now when you're working on a transaction that's important to you you are looking into everything every detail to try and understand your odds of winning the process and the team on the other side of this transaction started exploring the area codes he was calling from and pretty quickly matched it to the cities in the confidential information memorandum linked to the buyer universe so per his account they started calling back and probably in a forced casual tone asking so what are you doing in x city and every time he just said the same thing i'm up here for some last minute work nothing big so in the buyer's mind this guy's flying around meeting with everyone in person all these additional potential buyers that in reality don't exist that could be using the opportunity to explain why he should work with them instead so his only real buyer starts accommodating all of his requests and even raises the purchase price their team is moving quickly to get the loi executed but none of it's even happening he's just sitting in a hotel room waiting for calls to come in the work he's doing is negotiating a letter of intent with one buyer and creating the necessary negotiating leverage to get precisely what he wants now per the individual telling me the story he never lied and he managed to create the tension necessary to secure the terms he wanted and what's wild is it worked he sold the company and by the time he was telling me this story he had retired pretty wild kind of hilarious in future videos we will explore the loi in greater detail with the pdf document that was co-created with caton it will give you a better understanding of why this document is so critical and why someone would fly around the country waiting in hotel rooms to negotiate it all right team that's all for now thanks for watching