The Letter of Intent

The Letter of Intent

A letter of intent is a document that outlines the business terms of a purchase, including price, payment terms as well as many other key aspects such as requirements for retaining key staff members, the amount of working capital to be included in the sale,  the treatment of receivables and payables, non solicit and non-compete conditions, etc.   It is, however, typically non-binding which gives both parties the option to walk away at any time prior to closing.


The Deposit 


Offers sometimes come with a deposit which is held by the M&A Advisor in trust until the deal is consummated or terminated. There will be a signed agreement outlining the stipulations of the deposit should the transaction be cancelled. We always recommend that the deposit be refundable if for any reason the transaction does not close. This encourages a purchaser to take that big step.


Negotiating Through the M&A Advisor


The offer is just that—an offer. As the seller, you must assess the offer and its terms. Your M&A Advisor will advise you about the terms and conditions of the offer. We recommend that offers always contain a clause that makes it conditional upon terms that are acceptable by both parties and their legal advisors. This allows the parties to advance with the negotiation  through their M&A Advisor until the business terms have been agreed upon and most of the due diligence have been completed.  Then the sale enters the legal phase where your and the buyer’s legal counsel will prepare the definitive agreements and any other ancillary document necessary to complete the  Closing.


Working through a knowledgeable M&A advisor will increase the level of comfort of the parties building the trust needed for more successful and positive negotiations.


Keep in mind that acceptance of a negotiated offer is not a sale. 


Unfortunately, a deal can fall apart any time prior to the closing.  Getting an acceptable offer means that you are halfway to getting the deal done, but it is not done yet. Rely on your M&A Advisor to get you safely to the finish line. He will work with the other professionals assisting you and those of the buyer to find solutions. In the meantime, we will continue to market your business in case the deal collapses.


Trust your Mergex team!