Business Brokers Assistance With A Letter Of Intent
Business brokers are often asked by buyers to draft an 'offer' on a particular business for sale they might be interested in
. Offers can take several different formats though. The most common offer to buy a small business for sale is a conditional purchase offer. This agreement stipulates the common deal points like price, terms and other conditions.The conditional agreement is moved forward by the buyer who usually waives conditions as they become fulfilled until the deal goes firm.
The other common document that is used by buyers is the Letter of Intent (LOI). This article will examine some of the unique attributes of a Letter of Intent and how business brokers can assist in drafting one.
Non-binding
A letter of intent is usually a non-binding agreement that outlines the major deal points of what the buyer is considering. It is usually a precursor to the due diligence process and is an important document that allows a buyer and seller determine if there is possibly a deal to be had.
Most LOIs are non-binding in that both parties to the transaction are not obligated to the terms contained therein. The only two common terms that may be binding are exclusivity and confidentiality. Exclusivity means that the seller may not shop the business to other potential purchasers during the period of the LOI. Confidentiality refers to the buyer and seller not disclosing the terms of the letter of intent to other parties.
Deal Terms Are Outlined
Letters of intent are useful in that they outline the 'broad strokes' of a potential purchase. They usually articulate the offering price, seller financing asked for, what is being purchased and by whom and other broad deal terms. Although they are not the definitive purchase agreements they do reflect the spirit of the deal and any final agreements should for all practical purposes be close in definition to what was articulated.
Business Brokers Can Help Draft an LOI
An experienced business broker can assist you in drafting an LOI. The intermediary, if representing both parties, can be a good sounding board to both the buyer and the seller and a conduit for communication. As a buyer you can discuss with your business broker the deal points you want to put forth and he or she can properly document them. If you are a buyer though you should realize that a business broker often represents both sides to the deal so if you would like independent representation regarding the drafting of an LOI you can turn to your attorney or a business broker that is not representing the vendor. In any event, it's also a good idea to have a lawyer read through your LOI just so that you are thorough in your understanding of the document.
If you are contemplating buying a business and think that a letter of intent is a the right direction to take in pursuing the deal then work with a qualified business broker to help you. There are many good business brokers in Toronto who have experience with drafting proper LOIs that you can turn to.
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