GOOD INTENTIONS

The Letter of Intent (LOI) may be the single most important document created during the merger and acquisition process. This document outlines the mutually-agreed upon key business terms between the buyers and sellers. Although nonbinding in nature, sellers should always consider the following before signing the LOI:

• Provide the most accurate information and data during the preliminary due diligence process
• Thoroughly define the terms of the deal
• Disclose everything, including weaknesses. No surprises!

The LOI becomes the basis for all agreements and documents that legally bind a business sale. Therefore, sellers must use their leverage to establish a purchase price, structure financing, define terms, employment arrangements, and closing contingencies before signing the LOI and granting exclusivity to a single buyer. Failure to provide the necessary content to an LOI could be disastrous, and underscores the importance of having a trusted M&A Advisor by your side, walking you through the various stages of constructing the most advantageous Letter of Intent.