Buyer's Letter of Intent
Buyer/Seller Terms & Conditions
The Letter of Intent is a non-binding document describing the terms and
conditions the Buyer and Seller have agreed upon that is the basis for
preparing a Purchase Agreement. It contains these elements:
Offered purchase price
- Type of sale, Asset or Stock
- Non-compete terms
- Equipment list
The fundamentals of the deal are drafted in plain English and spelled out in
the Letter of Intent.
Presentation of the Offer
The Asset Sale & Purchase Agreement
Most transactions are structure as Asset Sales to minimize transaction costs
and eliminate the risk of transferring hidden liabilities to the Buyer.
Stock sales are more common in middle market transactions to preserve rights
that are attached to an existing legal entity. A draft Asset Sale & Purchase Agreement
is prepared based on the Letter of Intent, financing contingencies and
standard boilerplate clauses. Buyers and Sellers have numerous opportunities
to terminating the contract during the Due Diligence Period. The Agreement
is presented from the Buyer to the Seller with a deadline for acceptance or
counter-offer. A Purchase agreement prepared by the Advisor is often used as
the framework for the final documents prepared by attorneys
involved in the transaction.
View sample Asset Sale and Purchase Agreement
Counter-Offers & Acceptance
Getting to Yes
The initial offer to purchase may be rejected
or counter-offered. It is usually better not to present an offer than
present an offer that is unrealistic. Low-ball offers can impugn the
credibility of a Buyer.
Phase IV - Due Diligence - cont.