How Many Weeks of Exclusivity to Grant a Buyer
The weeks of exclusivity a buyer asks for when the letter of intent is signed never appear on an invoice. They still cost something. For an SME of 20 to 80 people sold for between CHF 3 and 15 million, the figure lands somewhere between CHF 30,000 and 120,000 in direct spending and management time, before you count what those weeks do to the price. The table below is the one I fill in with a seller before they grant twelve weeks to a candidate they have met three times.
What exclusivity costs, item by item
Exclusivity is the point at which the seller starts spending in earnest. From the letter of intent onwards, they open the data room, mobilise their advisers and their second line, and stop talking to the other candidates. The ranges below are orders of magnitude I observe in mid-sized SMEs in Switzerland; they move with the number of companies in the group, the real estate involved and the buyer's style. Elsewhere, in Germany or Austria, the fees differ; the items stay the same.
| Item | Order of magnitude (CHF) | What pushes it up |
|---|---|---|
| Negotiating and drafting the letter of intent | 4,000 to 12,000 | A buyer who already wants warranties and an earn-out fixed in it |
| Legal support during due diligence, answers to the Q&A | 15,000 to 45,000 | A poorly prepared data room, questions in bursts, contracts scattered across the company |
| Accountants: adjustments, financial answers, interim accounts | 6,000 to 25,000 | Unaudited accounts, several entities, an interim balance sheet requested |
| The owner's time: two to three days a week for 8 to 12 weeks | 20,000 to 50,000 in equivalent pay | No finance director, the owner as sole point of contact |
| Key managers' time for site visits and answers | 5,000 to 15,000 | A small team, managers not yet informed, peak season |
| Frozen decisions: hiring, investment, major contracts | Hard to quantify, sometimes more than everything else | An ordinary-course-of-business clause drafted too broadly |
| Price renegotiation after due diligence | 5 to 15% of the agreed price, when it happens | Alternative candidates gone, deadline passed, a tired seller |
The first five lines make up the visible cost: CHF 50,000 to 150,000 for a mid-sized file, less for a company of twenty people with audited accounts and a data room ready to open. It is predictable, and the buyer spends as much on their side.
The last two lines are of a different kind. They do not always fall due, but when they do, they outweigh everything else combined. A 10% reduction on a price of 8 million is 800,000; no line of fees comes close. And that renegotiation is tied directly to exclusivity. A buyer who knows the seller has nobody else at the table, that the seller's advisers have already billed three months of work and that the timetable has slipped, also knows that their requests for adjustment will be heard with new attention. That is the position the clause has given them.
The cost with no line of its own: the other candidates
What exclusivity takes from the seller is competition, and competition is the only thing that holds a price. When you close the discussions with the two other serious candidates, you do not put them on hold. You partly lose them. A candidate set aside for three months finds another file, or comes back with a lower offer because they now know the first choice failed. In the mandates I run, one letter of intent in three or four does not lead to a closing, most often for reasons on the buyer's side: financing less firm than announced, disagreement among their own shareholders, a point found in due diligence that they had not wanted to see. The seller walks away with fees already spent, a timetable pushed back by four to six months, and a market that has noted the file "went round".
That loss is hard to repair afterwards. It is prevented beforehand, by putting limits on the clause, which is exactly what a letter of intent signed too quickly almost always neglects.
How many weeks, and in exchange for what
The right length is the one that lets a serious buyer finish their due diligence and draft the contract, and not a week more. For a mid-sized SME whose data room is ready when it opens, six to eight weeks are almost always enough. Ten to twelve are justified for a group of several companies, real estate that needs an appraisal, or a buyer who depends on approval from a distant board. Beyond that, it is no longer working time. It is a free option on your company that you are handing to the buyer.
Three elements turn a duration into a steering instrument.
Milestones. Eight weeks only mean something if dates are attached: complete data room in week 1, end of written questions in week 4, due diligence report and price confirmation in week 5, first draft of the sale agreement in week 6. A milestone the buyer misses, without cause attributable to the seller, ends the exclusivity or reopens it for negotiation. This mechanism replaces tacit extension, the most common road from eight weeks to five months.
Exit conditions. Exclusivity can lapse if the buyer comes back with a price more than a set percentage below the agreed range, or if they have not produced written confirmation of their financing by a fixed date. These clauses change the buyer's behaviour during due diligence: renegotiation now has a price for them too.
The counterpart. Exclusivity is a currency; it is traded. In return for the weeks you grant, ask for a narrow price range rather than an indicative figure, the list of points the buyer intends to verify, a letter from their bank, a contribution to your advisory costs if the transaction fails through their doing. That last item remains rare in SME sales; a private buyer will often refuse it, a financial investor will discuss it. Asking is never wasted: the answer tells you how serious the candidate is.
A clause you write, not one you submit to
Picture a precision engineering company of 45 people, sold to a family-owned group in the same industry; a hypothetical case, not a client. The buyer proposes sixteen weeks of exclusivity, without milestones, on an "indicative" price. The seller gets it down to eight, with four dates, a financing confirmation in week 3 and a clause that releases the exclusivity if the adjusted price drops more than 7% below the offer. Due diligence ends in week 7. The buyer asks for a 4% reduction over a supplier dispute found in the files; they get half of it. The two other candidates, told to expect a two-month timetable, are still reachable. After five months, they would not be.
The cost of exclusivity is not in the clause. It is in what the clause leaves out: no dates, no exit, no counterpart. Every week granted without those three pieces goes onto the seller's account, at the point where the fatigue of negotiating starts to decide in their place. Writing those three pieces takes one meeting and a few thousand francs in fees: of the whole table, it is the line with the best return.