Buyer's Corner


Preparing an LOI and Getting an Acceptance

Writing a letter of intent (LOI) to purchase a business is a crucial step in the acquisition process. It sets the groundwork for negotiations and outlines the terms and conditions of the proposed transaction. A well-crafted LOI should be clear, concise, and professional. Here are the key elements to include:

1. **Introduction**: Begin with a formal salutation and introduction, addressing the seller or their representative. Clearly state your intention to purchase the business and express your interest in proceeding with negotiations.

2. **Purchase Price and Terms**: Specify the proposed purchase price for the business and outline the terms of payment, including any initial deposit and the proposed schedule for subsequent payments. You may also include details regarding financing arrangements, if applicable.

3. **Assets Included**: Clearly define the assets that are included in the sale. This may encompass tangible assets such as equipment, inventory, and real estate, as well as intangible assets like intellectual property and customer contracts.

4. **Liabilities Excluded**: Specify any liabilities or obligations that will not be assumed by the buyer upon completion of the sale. This could include outstanding debts, pending litigation, or contractual obligations.

5. **Due Diligence Period**: Outline the duration of the due diligence period, during which the buyer will have the opportunity to conduct a thorough review of the business's financial, operational, and legal records. Specify any access requirements or documentation that will be needed during this phase.

6. **Confidentiality**: Include provisions to maintain the confidentiality of sensitive information shared during the negotiation process. Both parties should agree to refrain from disclosing proprietary information to third parties without prior consent.

7. **Exclusivity and Non-Disclosure**: Request exclusivity during the negotiation period, preventing the seller from engaging with other potential buyers. Additionally, include a non-disclosure agreement (NDA) to protect the confidentiality of discussions and information shared.

8. **Closing Conditions**: Detail any conditions that must be satisfied before the transaction can be finalized. This may include obtaining necessary regulatory approvals, securing financing, or resolving outstanding legal issues.

9. **Timeline**: Provide an estimated timeline for completing the transaction, including key milestones such as the signing of a definitive purchase agreement and the closing date.

10. **Legal and Financial Advisors**: Encourage the seller to seek independent legal and financial advice before proceeding with the transaction. Acknowledge that both parties have the right to terminate negotiations at any time.

11. **Contact Information**: Conclude the letter with your contact information, including your name, title, company name (if applicable), address, phone number, and email address. Invite the seller to contact you with any questions or concerns.

12. **Signature**: End the letter with a formal closing, such as "Sincerely" or "Regards," followed by your signature and printed name.

Remember to review the letter carefully before sending it to ensure accuracy and professionalism. A well-written letter of intent can lay the foundation for a successful business acquisition.

Written by Justin Cotta Holmes, Transworld Business Advisors of Maine    Find other articles here    TBA Blog