A well-structured LOI is a blueprint for a successful business sale, setting clear terms and aligning expectations between buyer and seller. It begins with identifying the parties, the business, and the typically non-binding intent to proceed. Financial terms, including the purchase price, payment structure (cash, financing, or earnout), and any deposits, are clearly defined.
It also outlines the scope of the sale, specifying whether assets, inventory, intellectual property, or equity are included. Contingencies, such as due diligence, financing, or lease transfers, are detailed, along with timelines for resolution. An exclusivity clause is often included to provide the buyer time to finalize the deal without competition.
Confidentiality agreements ensure sensitive information remains protected throughout the process. Post-closing considerations, such as non-compete agreements or seller transition support, should also be addressed.
Ultimately a clear and precise LOI minimizes misunderstandings and sets a strong foundation for final negotiations, which is one area in which the help of a business broker can make a difference.
