A Letter of Intent (LOI) can serve various purposes, depending on the circumstances. If you are selling or buying a business, the Letter of Intent signals that both parties are committed to negotiating a final deal.
Once a merger or acquisition candidate has been identified, the parties engage in talks to see if a definitive deal is feasible. If not, the parties walk away. However, if that collaboration and synergy is established, you should contact a lawyer who focuses on Letters of Intent in Georgia. At Sparks Law, our skilled attorneys can help you draft this crucial document in the business negotiation process.
The Letter of Intent is usually presented to the seller by the buyer in an acquisition. This lets the seller know that the buyer is serious. Alternatively, a deal can be structured as a merger, which also involves a Letter of Intent.
A friendly acquisition occurs when one company buys another company that wishes to be sold. The acquired company can operate as a subsidiary of the parent or be absorbed into the acquiring company. A skilled attorney at our Georgia law firm can review or draft Letters of Intent to kick off a successful merger or acquisition.
A Letter of Intent precedes a binding definitive agreement. This document is exploratory and gives the parties time to research the potential benefits and operations of the post-transaction company. Although the LOI does not bind the parties to go through with the sale, it does contain provisions the parties agree to adhere to, including a tentative price and payment terms, a lock-up period during which due diligence is performed, a closing date, and a promise not to divulge confidential information.
A lock-up period binds the parties to only negotiate with each other. This protects a buyer who might be at risk if a seller attempts to shop the deal, hoping for a higher bidder. The seller also gains peace of mind that the buyer is not on the lookout for a more lucrative deal.
Due diligence is a chance for buyers and sellers to evaluate the other party’s suitability as a merger or acquisition candidate. This period of time allows for exploration of the management teams’ successes and failures, the growth in market share, the success of current product offerings, and plans for future development. Other elements that might be included in due diligence are:
The Letter of Intent also specifies a period to complete due diligence. This timeframe is often the same length as the lock-up period, usually from thirty to 120 days. Companies anxious to sell may lobby for a shorter timeframe because they cannot talk to other buyers if bound by an LOI. Our experienced lawyers in the area can help ensure that the timeframe in your Letter of Intent is beneficial for your goals in closing the deal.
Much of what a seller shares with a prospective buyer is sensitive information, and it may harm the company if their proprietary facts are too widely known. As such, sellers should be adamant about requiring a confidentiality clause in any Letter of Intent. A diligent attorney can help draft an effective LOI to protect the information of your Georgia business.
Whether you are the buyer or seller in a merger or acquisition, Letters of Intent are a crucial first step to achieving a satisfactory outcome. Because these types of business combinations can be complicated, it is crucial to work with a dedicated attorney who can guide you through the process.
At Sparks Law, our lawyers are experienced at drafting Letters of Intent in Georgia. Call our office to learn more about a well-written document can safeguard your business interests.