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Selling the Company > Valuation - Pg. 71

Financing a Game Development Venture 71 A publisher looks for a developer with a stable team and a track record of delivering hit games on time and on budget. The publisher is usually buying a team first and foremost, but it will pay a much higher price if there is valuable proprietary technology (like a great AI for war sims) and/or content (like a game franchise) attached. While a sale can be full of more plot twists than a soap opera, it will usually follow this script: 1. Buyer and seller establish mutual interest and negotiate a letter of intent , a letter signed by both parties that sets out the basic terms of the sale. The letter of intent is usually valid for a short period of time, around 30 days, during which time the seller cannot shop the company around. During the exclusivity period, the buyer performs a due diligence examination of the target company, looking into its financials, liabilities, making sure that it owns all of its intellectual property, and so on. At the same time, lawyers for both parties are assembling the contracts necessary for the sale. If due diligence turns up unexpected liabilities (example: it turns out that the seller owes $50,000 in back taxes, or the seller does not have clear title , or ownership, to one of its intel- lectual properties), the parties will renegotiate terms of the purchase. The parties sign the documents and exchange property at a closing . 2. 3.