In the world of mergers and acquisitions, few documents are as deceptively simple – and as critical – as the Letter of Intent (LOI). It’s the handshake before the contract, the initial blueprint of what a sale might look like. But for many small and medium-sized business owners preparing to sell, the LOI is often rushed through or under-negotiated, particularly when it comes to clauses that protect your time, effort and money.
One such clause is the break-up fee. And if you’ve never heard of it, or dismissed it as something only buyers care about, I’d encourage you to think again.
Having spent decades in the UK property market and now acquiring businesses myself, I’ve seen far too many deals fall apart after weeks – or even months – of talks, due diligence and legal wrangling. What’s often left behind is frustration, cost, and the unsettling feeling that the whole thing could’ve been handled more fairly. That’s why, when I enter into negotiations with a seller, I’m not just thinking about my own risk. I’m thinking about theirs too.
Historically, LOIs in the lower mid-market have followed a buyer-favourable script. Sellers are expected to commit to exclusivity, reveal commercially sensitive information, and engage with legal and financial advisors – all without clear protections in place if the buyer walks away.
The reality is, a large percentage of LOIs never make it to completion. Reasons vary: buyers disappear, fail to secure financing, or shift their focus. But regardless of why, the person left holding the bag is often the seller – especially when they’ve invested real time and energy preparing for the deal.
That’s where break-up fees come in. These are clauses built into the LOI that say, “If this deal falls through for certain reasons, there will be compensation for wasted costs.” It’s not about being adversarial. It’s about creating mutual accountability, and sending a signal that both parties are serious.
When buyers insist on break-up fees, sellers may feel uneasy. I understand that – especially if you’re the one incurring most of the advisor fees. But here’s the thing: these clauses can, and should, be collaborative.
A good break-up provision doesn’t protect one party at the expense of the other. It’s designed to protect both of you from the wrong kind of behaviour – delays, backtracking, or cold feet. Typically, a break-up fee would come into effect if:
In these instances, the buyer – who will have incurred substantial advisory fees by that stage – would receive compensation, usually just enough to cover those costs. Crucially, this is not a punitive fee. It’s not about making a profit. It’s about keeping both parties invested in good faith execution of the deal.
As a buyer myself, I insist on this not to make life harder for sellers, but to show them I’m serious. I’m putting skin in the game. I want to get the deal done, and I want it to be fair – for both of us.
If you’re considering selling your business, don’t think of an LOI as just another formality. It’s your chance to define the terms of engagement and protect your position from day one.
Don’t be afraid to ask for terms that protect you, too. Just as a buyer might want recourse if you change your mind or delay the process, you should have the same assurances from them. A serious buyer will understand this – and in fact, they’ll likely welcome it. If they hesitate at reasonable protections for both sides, that’s a red flag worth paying attention to.
In our own acquisition efforts, we treat every seller with the respect and professionalism they deserve. We work to ensure that deals are structured in a way that minimises stress and uncertainty, and that every stage – from LOI to close – feels equitable and transparent. That includes working together on break-up provisions that protect both parties’ time and investment.
For many business owners, selling is not just a transaction – it’s the end of a chapter and the start of a new one. You deserve to move through that process with clarity, dignity, and confidence that the person on the other side of the table is taking your future as seriously as you are.
Break-up fees aren’t about distrust. They’re about putting a framework in place so that trust can thrive. They ensure that both parties are committed to seeing the process through and signal that everyone’s time matters equally.
If you’re considering selling your property business – or are just curious about how the process might look – I’d be happy to have an informal chat. No hard sell, no pressure. Just a conversation about what a fair and well-structured exit might look like, and how I approach acquisitions in a way that puts sellers first.
Any questions? Feel free to get in touch.