Mergers and acquisitions are common in the business world. If you are trying to sell your business, you want to make sure a potential buyer is serious about their offer.
Requesting an LOI or “letter of intent” will help you sort out a serious buyer from one who is just testing the water. A mergers and acquisitions lawyer will help draft and/or review any letters of intent.
What Is a Letter of Intent?
A letter of intent is just what it says. It is a letter stating the purchaser’s intent or interest in buying a company or business. An LOI can contain many factors such as possible price, conditions and stipulations that both companies must agree to for the sale to proceed according to the suggested timeline.
Although the letter of intent is binding to a degree, it does not bind the buyer to actually purchase the company if any issues present themselves that cannot be resolved. The LOI will also contain the terms of the sale and any specific details that will be included in the final contract.
Why Is It Important to Remain Exclusive Once an LOI Has Been Received?
Once a potential buyer has submitted a letter of intent, the seller must work exclusively with them for a pre-determined period of time. In the majority of cases, this can range between 30 to 180 days depending on what is agreed upon within the LOI.
Remaining exclusive gives the potential buyer and their mergers and acquisitions lawyer time to explore financing options, permits and any other potential things they may need if they move forward with the purchase.
It also gives then an inside look at the company that will give them a better idea of what to expect when they take over management of the business.