A letter of exclusivity records an agreement to negotiate with a specified party without pursuing defined alternatives for a stated period.
Definition
For an engineering firm owner, a letter of exclusivity documents a restriction on discussions or negotiations while a possible transaction is explored. It may be a separate document or part of a letter of intent. The writing should identify the parties, covered opportunities, start and end points, exceptions, and any required process for extending or ending the restriction. Scope and duration vary with the deal and the parties' bargaining positions. The letter may also address access to information or cooperation, but those duties depend on its terms. It is not a purchase agreement, does not itself transfer ownership, and does not guarantee that negotiations will result in a sale. It differs from a confidentiality agreement, which governs handling of nonpublic information. Owners compare the restriction with diligence timing and the possibility that negotiations may not close, and review it with related sale planning materials.
How owners use it
- The owner records the beginning and ending dates and any notice requirements in the transaction calendar.
- The firm identifies which buyer discussions are covered and documents any stated exceptions.
- If a 60-day period has 24 days elapsed, 60 - 24 = 36 days remain.
- The seller coordinates diligence access and response deadlines with the exclusive negotiation period.
