This allows you to examine the business much more closely and puts the seller’s mind at ease. This lets the seller know that they can safely disclose key information about the business to you, such as their financial records, client lists, and intellectual property, and that you will keep it confidential. Although it is not a legally binding agreement to purchase, it may include elements that create binding obligations between the potential buyer and seller, including:
What is a letter of intent?Ī letter of intent is a letter from you to the seller of the business that lets them know that you are seriously considering submitting a formal bid to purchase the business, and that lays out the proposed transaction details at a high level. The tool you use at this point is a letter of intent - which is often referred to as an LOI. This makes it possible to deepen your research and move the project forward. Once you’ve set your objectives for buying a business, done your initial research and identified what looks like a good acquisition target, it’s time to let the seller know that you’re officially interested.
