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January 9, 2023

Deal origination requires a well-planned strategy, and starts with informal conversations with a potential target. In this article, Jeremy Segal, Executive Vice President of Corporate Development at Progress, discusses what happens behind the scenes between the first conversation to LOI in M&A. 

"The importance of people is huge. Having those relationships in place gives you greater conviction and confidence that a deal can be successful." – Jeremy Segal

First conversations 

According to Jeremy, the initial conversations with a potential target should start with building relationships and trust. These conversations allow the buyer and seller to get to know each other and explore possibilities of working together. 

To avoid scaring target companies away, do not approach them with the intent of an acquisition. Get to know the company first and determine if they are relevant and fit your organization's criteria. There are vital points that buyers must find out during these conversations:

  • History
  • Products 
  • Team size
  • Operations
  • Technology

Approaching LOI

If everything goes well, and both companies agree to explore M&A, they sign an NDA. The seller should provide basic information so the buyer can put together an offer. 

  • PnL
  • balance sheet
  • recurring revenue streams
  • operating expenses
  • the cost of goods sold. 

At this point, Jeremy involves a limited set of folks to draft an LOI. 

  • Legal team - helps draft and negotiate the letter of intent.
  • Finance team - helps build out the financial model.
  • Executive champion - involved in evaluating the company from a technology and a go-to-market standpoint.

Even at a high level, the buyer must come up with a valuation that reflects the target business's value and potential synergies


Negotiations can vary from deal to deal, but the goal remains the same - to find a middle ground where both parties can be happy to move forward with the deal. The below are some of the most common things negotiated by both parties during the LOI stage: 

  1. Purchase price - Price is the most significant negotiating point. Price can still change as the deal progresses, but sellers typically want to negotiate upfront if the discrepancy is too substantial. Sellers also like to understand what could affect the initial offer price. 
  1. Rep and warranty insurance - In some situations, the seller or the banker wants the buyer to commit a rep and warranty insurance as a recourse for indemnity.
  1. Exclusivity - In a proprietary deal, getting exclusivity is essential for buyers so they can commit to diligence and ensure the commitment of the target company. 
  1. Structure - Buyers want high-level visibility on the deal structure so they know what to expect.
  2. People aspect - Other sellers want their employee's taken care of after the transaction. Buyers must reassure the sellers by including retention packages for the people they will acquire in the LOI.
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