Three letters, one big misunderstanding

A founder gets an MOU in their inbox and thinks: *we're done.* Champagne. Call the lawyer to close, not to negotiate.

That's the wrong read. An MOU — Memorandum of Understanding — is a document that lays out the preliminary terms two parties have agreed on before the real work starts. Not the deal. The outline of a possible deal.

Most of an MOU isn't binding. It's a snapshot of where both sides stand today, before diligence has poked a single hole in anything. The price in it is a starting range, not a wire transfer. The structure is a proposal, not a promise.

What's actually in one

A typical M&A MOU covers:

  • Indicative valuation or price range — a number the buyer is willing to explore, not sign a check for
  • Proposed deal structure — how the transaction might work (your lawyer and accountant confirm what this actually means for you — never take a banker's word on legal or tax outcomes)
  • Timeline — how long diligence, negotiation, and closing are expected to take
  • Conditions — the things that have to be true (financing, board approval, clean diligence) before anything binds

That's the friendly part. Now the part that actually matters.

The clause that isn't friendly

Almost every MOU has a section that IS binding, no matter what the rest of the page says: exclusivity. Sometimes called a no-shop clause.

Sign it, and you agree not to talk to anyone else — no other buyers, no other conversations, sometimes for months — while this one buyer takes their time deciding if they still want you. If they walk at week ten, you haven't just lost a buyer. You've lost the window you spent not talking to the other three.

Here's the belief we lead with: an MOU isn't the finish line. It's a leash — and you should know exactly how long it is before you put it on.

Big banks like founders to feel like the MOU is the deal, because a signed MOU feels like a win they can report up the chain. We think a founder should read the exclusivity period the way they'd read a lease — length, exit terms, what happens if the other side just... stops calling.

Ask before you sign

None of this is legal advice, and it shouldn't be treated as any — an MOU's binding sections vary by document, by jurisdiction, by what someone typed at 11pm before a call. Before you sign anything, have your own lawyer walk you through what's actually enforceable and what isn't. That's not caution for caution's sake. It's the difference between a document that protects your optionality and one that quietly removes it.

Why the MOU matters less when you've done the work early

Here's the thing an MOU can't fix: if the buyer barely knows you, the MOU is where they're still figuring out if they even want the deal. That's exactly the moment exclusivity hurts most — you've locked the door and they're still deciding whether to knock.

A buyer who's spent a year getting to know your business doesn't need the MOU to do that work. They've already decided. The document just writes down what they already know to be true. That's the whole point of starting early — by the time paper gets involved, the relationship has already done the convincing.

An MOU is a useful tool. It's not a milestone to celebrate. Read the exclusivity clause twice, ask your lawyer to read it a third time, and don't confuse a handshake on paper with a deal in the bank.

The truth, first.