Negotiating the Deal: Counteroffers, Due Diligence, and the Letter of Intent
In our last discussion, we covered how to gather crucial information about a site and make an offer. Today, we’ll walk through the following steps: handling counteroffers, conducting due diligence, and drafting a letter of intent.
Once your offer is submitted, the real work begins. If you’re working with a broker like Adult Site Broker, we will handle the negotiation on your behalf.
Handling Counteroffers
It’s common for the seller to counter your initial offer. If they do, you’ll need to decide whether you will raise your bid. You can either accept their counteroffer or come back with another amount.
A key piece of advice: always leave room to negotiate. Don’t make your highest offer upfront. If you do, and the seller counters, you’ll have no flexibility. By starting a little lower, you leave space for adjustments if the seller pushes back.
Due Diligence
Once you and the seller agree on a price, it’s time to dive deeper into due diligence. While you’ve likely asked plenty of questions up until now, this is your opportunity to investigate the technical and operational aspects of the site thoroughly.
Here are some areas to focus on during due diligence:
- Billing and Revenue: Ensure you’ve verified how many new sign-ups and rebills occur daily. Look into the billing methods and ensure the processes are compatible with your needs.
- Content and Production: Confirm how the content is produced and the ongoing costs. If there are third-party producers, check whether those relationships will continue post-sale.
- Technical Setup: Ensure the site’s hosting, coding, and platform architecture align with your current infrastructure or plans. If you’re not tech-savvy, consider bringing in a developer or technical consultant to assess the back end and ensure everything will integrate smoothly.
Due diligence is your opportunity to verify that what you’re buying will work for your needs. Skipping this step can lead to costly surprises down the line.
Drafting the Sales Agreement
Once your due diligence is complete, the next step is drafting a sales agreement. Ideally, your legal team should draft the agreement. Why? Because this allows you to set the terms of the deal and have more control over the process.
Having a clear and detailed agreement is essential. It should:
- Lay out the exact terms of the sale
- Define the roles and responsibilities of both the buyer and the seller.
- Establish timelines for the handover.
- Include clauses that protect both parties in case of unforeseen issues.
Expect the seller’s attorney to suggest revisions, but remember that everything in the deal is negotiable until both parties sign. The key here is to negotiate thoroughly to ensure the agreement is in your favor and no critical details are overlooked.
The Letter of Intent
At Adult Site Broker, we also recommend drafting a letter of intent (LOI) before the formal sales agreement. The LOI serves as a preliminary agreement outlining the significant terms of the deal. It’s essentially a roadmap for your attorney to follow when drawing up the final sales contract.
The LOI and the final agreement will cover all aspects of the sale, including who pays for what. For example, who is responsible for the escrow fees? This can be negotiated—sometimes, the buyer covers it; other times, it’s split between both parties.
Conclusion
Once the sales agreement is in place and the terms are settled, you’re almost at the finish line. In our following discussion, we’ll focus on finalizing the deal with your attorney and completing the purchase process.
If anyone has any questions about anything you see in this article, I’d be more than happy to help. Contact us on our website.
