The five clauses in every buyer's first letter - and what each one is really doing

I wrote buyer letters for 15 years. They are courteous, flattering and short - and every sentence is doing a job. Here are the five clauses that appear in almost all of them, and what each is actually for.

1. The number. “We propose an enterprise value of $X million.” The first number in a negotiation exerts gravity on every number that follows - that is anchoring, and buyers know it. The figure is usually calculated to be exciting enough to start a conversation and low enough to leave room. What it is not: a valuation. It is priced off whatever limited information the buyer holds, discounted for everything they cannot yet verify. Treat it as the opening of a range whose top end you have not seen - because you have not shown them why the top end is deserved.

2. The structure. “...comprising $X at completion and $X deferred against future performance.” The earn-out paragraph is the buyer's honest opinion of your business, written politely. Every dollar deferred is a doubt: about what happens when you leave, about the customer relationships that live in your phone, about a forecast they have not tested. The instinct is to negotiate the percentage. The better move is to attack the doubts that created it - most of them are fixable, given time.

3. The conditions. “Subject to satisfactory due diligence across financial, legal, tax and commercial workstreams.” This clause makes the whole letter provisional - which means the price you are excited about is the ceiling, not the floor. Every finding in diligence adjusts downward from here. Buyers budget for this: the letter price gets the exclusivity; the findings get the discount. Owners who have run their own diligence first take that playbook away.

4. The exclusivity ask. “This indication is conditional on an exclusivity period of X weeks.” The most expensive sentence in the letter, dressed as the most procedural. Exclusivity removes your only structural leverage - the possibility of someone else - before verification begins. Then time does the rest: weeks in, costs sunk, emotionally committed, the adjustments arrive and walking away feels impossible. Exclusivity is sometimes reasonable; it is never reasonable in reply one, unpriced, for free.

5. The confidentiality paragraph. Mutual confidentiality is genuinely in everyone's interest - leaks move staff and customers. But notice what it also does: it keeps the approach out of the hands of anyone who might create competition, and it often arrives bundled with a request to deal only with the principal. Confidentiality yes; isolation no. The two people who must know before you reply: your adviser, and whoever you trust to tell you the truth about your own readiness.

What to do with all this: nothing quickly. Acknowledge, set your own substantive date, and use the time to learn what they will find before they find it. The letter took them weeks to write. Your reply deserves more than a weekend.