What is the Letter Of Intent in Investment Banking - 8 Milestones of M&A - Transact Capital

Описание: Greetings, everyone! Thank you for being a part of our informative series on the Eight Milestones of Mergers and Acquisitions. I'm Jacob, your host, and in today's episode, we're unveiling a significant step in your M&A journey – the Letter of Intent document, or simply, the LOI.

This is an exciting phase because it means that we have a buyer who genuinely values your company and is submitting their best offer to acquire your business. We call for LOI submissions after the management meetings, aiming to collect them all at once for your review.

The LOI is a formal document signifying the buyer's interest in exclusively engaging your company for a specified period, during which they can conduct a comprehensive due diligence process. An essential point to remember is that once you accept the LOI, you are generally prohibited from speaking with other potential buyers. This is a crucial aspect to emphasize.

The LOI is the phase where, as the seller, you begin to cede some control over the process. Why is this understanding important? Because the LOI should encompass a summary description of all the material deal terms that will later appear in the purchase agreement. From our seasoned perspective as an experienced Investment Bank, it's better to cover more details in the LOI than to defer them to the final purchase agreement. This allows you to negotiate from a position of strength.

The LOI typically spans around 10 pages and can cover various items, which we will work closely with you to fully understand before you make a final decision. It's important to note that the LOI is generally non-binding, meaning the buyer is 100% committed but not 100% bound to purchasing your company. However, there may be binding aspects included at this stage.

In an ideal scenario, we'll create a comparison chart, similar to the one pictured here, to enable you to efficiently compare various offers and find the best one aligned with your goals. Keep in mind that the results from the management meetings will also factor into your decision-making.

Once a decision is reached, you'll sign the best LOI, setting the stage for working towards the final purchase agreement, a topic we'll explore in our next video.

Don't miss the next installment of our series on the 8 Milestones of M&A, presented by Transact Capital.

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