First, in getting to the letter of intent, the most contentious issue is the classic determining value and agreement on the basis for the valuation of the business. So, what the basis is, and then what’s the drivers or the multiple that the buyer is willing to pay versus what the vendor is willing to sell for.
The other issue that goes right along with valuation is deferred or contingent consideration. I will put the caveat here that we deal with a lot of lower middle market companies between $3 million to $50 million in sales. In many cases, transactions that will have some kind of consideration beyond the close, so an earn out, holdback, or seller's note. So, the second most contentious piece in getting to that LOI tends to be what the terms are around that contingent consideration. Those are the two that tend to be most contentious in getting to an LOI.
On the second part, beyond the letter of intent, from my experience in middle market deals, negotiating the working capital tends to be the next most contentious area. As much as we like to have the working capital defined pre letter of intent in many cases, that is very difficult to determine.