| ||Ask HN: Ask for earnest money with offer?|
4 points by throwearnest 8 months ago | hide | past | web | favorite | 4 comments |
|My co-founder and I have been running a small software company by ourselves in a low cost of living area for several years. We are in discussions with a larger company in the same industry who says they are preparing a formal offer. We are expecting it to be high 6-figures, low 7-figures, which could be enough for us to accept, depending on specifics. We will be working with a lawyer, but want to keep the fees manageable.|
I have seen stories where the bigger company takes months in due diligence to inspects financials, code, etc. then walks away and builds their own version, instead of following through with an acquisition.
What can be done to minimize this risk? We were thinking a non-refundable earnest deposit, maybe 5-10% of the purchase price. Has anyone come across this on either side of a deal? I like to think it would discourage window shoppers, but for a larger company this amount it is still relatively cheap for market research and insight into a competitor. If they walked away it would not prevent their competition, but would at least give us something for our time spent on the deal.
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