Chapter 13

LOI and Behold: Making or Receiving an Offer

IN THIS CHAPTER

check Understanding the LOI’s purpose

check Looking at the LOI’s inner workings

check Considering extending exclusivity

check Moving forward after the letter is signed

Although many things — an indication of interest (see Chapter 9), a term sheet, a phone call where Buyer says, “We’re interested and we’re willing to pay $10 million” — can be an offer in the M&A world, not all offers are created equal. In the world of offers, the letter of intent (LOI) is in a class of its own; it’s the gold standard of offers. This chapter gives you the lowdown on this document, including its important parts and some considerations to keep in mind while reviewing it.

Signaling Sincerity with a Letter of Intent

An LOI is basically a marriage proposal from Buyer. Both parties promise to stop seeing others and signal to each other that they’re very serious about wrapping up the deal. In dating, that deal is wrapped up at the wedding; in M&A, it happens at the closing.

As the name implies, the LOI lays out the intent of both parties: Seller states she ...

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