Spoiler alert: YAY. Big, big yay.
Sometimes in M&A deals, the parties are tempted to bypass the Letter of Intent (LOI) stage and go straight to drafting the purchase agreement. After all, why add another document when everyone’s eager to close?
While I understand the temptation, as a transactional attorney with 20+ years of experience in hundreds of business deals, I wouldn’t recommend it. Here’s why LOIs are a must in my deals:
✅ LOIs set the foundation for the purchase agreement, ensuring all parties align on critical business and legal issues. Pre-negotiating potential dealbreakers prevents surprises and keeps the deal from blowing up later.
✅LOIs streamline the drafting process. With a well-drafted LOI as the framework, attorneys can expedite the sale agreement and keep timelines moving smoothly.
✅LOIs demonstrate commitment. Negotiating a business sale is time-consuming and expensive for both parties. A signed LOI gives comfort that everyone is committed to moving forward. Add an earnest money deposit after signing, and you’ve got additional buyer skin in the game.
✅Some LOI terms can be binding. While most terms are generally non-binding, certain provisions like a “no-shop” can be made binding and protect the buyer by ensuring that the seller isn’t entertaining other offers.
At Constant Counsel, we help buyers and sellers bridge the gap, navigate the sale process and close deals.
#M&A #LetterOfIntent #LOI #BusinessSales #ConstantCounsel