A letter of intent for business acquisition is a formal way of letting the seller know about your interest in purchasing the business or assets. It is of immense importance in business transactions as it helps the buyer and the seller to reach a consensus before a detailed business agreement can be prepared.
A letter of intent or LOI is a written document, written by the buyer to the seller of a property to show his intent to explore the possibilities of an acquisition. The letter of intent is not a legal document and is non-binding in nature, except for the exclusivity and confidentiality factors. It is very useful in preparing a blueprint for future course of action on the business proposal. A letter of intent saves a lot of time, effort and capital as it gives both the buyer and seller an insight into whether the concerned parties have a sufficient agreement in order to proceed to preparing an acquisition transaction agreement.
A letter of intent includes some important terms and conditions so that there is no ambiguity and there is a clear understanding between the concerned parties. When the buyer and the seller sit down to discuss the various nuances of the business proposal, there can be issues on which there are some disagreements. A letter of intent mentions the outline of the seller’s proposal with an aim to narrow down the disagreement. A letter of intent covers the general terms of the business deal, including the structure and the timing of the business transaction. A letter of intent can either be written in a short and concise form or in a detailed form. Both of these formats have their own advantages. A shorter letter of intent is less complex and generally it encourages the seller to be more involved in the transaction. A detailed letter of intent, on the other hand gives the buyer a better insight into the problems that may come up, before he gets down to prepare a comprehensive agreement.
Sample Letter
| Date:
Name: Address: Letter of Intent to Purchase Dear _______, This letter of intent is in regards to the discussion that we had for the purchase of ___________, located in ______________(City). This letter is not obligatory and does not bind the concerned parties in any legal agreement. The terms and conditions are: As per the discussions, the approximate amount of the business to be purchased is $___________. This is based on the condition that the working capital of the business either exceeds or is equal to $0. You will allow us to carry a full examination of all the business records and any information that we come across will be kept confidential as per the Confidentiality Agreement that was signed by both the concerned parties on __________ (date). All the matters pertaining to the transfer of the property would be governed by the laws of the State. The transfer of business and all the associated assets would be transferred over to us in ________(City), _______ (State), on ________(date). If the terms and conditions mentioned in this letter are acceptable to you, then you may please sign the letter and return it to us at our corresponding address. However, if you feel that there are certain terms and conditions on which you wish to have further discussion, you can get in touch with us so that a consensus is reached upon. Regards, __________(Signature, if handwritten) |
This was a sample letter of intent. A letter of intent helps in carrying forward the process of discussion and helps both the concerned parties to reach an agreement.