A business letter of intent is a powerful document in the world of business. It provides real proof to investors, stockholders or lenders that a business deal, proposed sale or other significant transaction is going to take place. Business letters of intent are often used before a buyout, merger, downsizing or other restructuring move by a company.
A letter of intent should reveal as much about the upcoming transaction as possible without disclosing confidential information. It usually specifies certain confidentiality agreements inherent in the process and may even restrict who should see the information enclosed. A good letter of intent will always spell out the upcoming process clearly and without ambiguity, as shown in the following business letter samples:
First Section: The first paragraph is generally an acceptance statement that outlines the parties involved and the action that will be taking place. For example: "This letter is to solidify the intent of Company A to acquire Company B in a merger/buyout. This process will begin on April 1st and be completed by the end of the calendar year."
Second Section: The conditions of the negotiations should be outlined here and may include a request for good faith negotiations or a request to limit negotiations with others during the process. The letter can give permission for disclosure or request restrictions on leaking info to other parties. For example: "We look forward to meeting with the attorneys in the April meeting to sign contracts and start the merging process of our two companies. Please keep the enclosed information confidential and away from unnecessary third parties until after that meeting."
Third Section: The details of the transaction can be outlined here and may include a time frame, names of people involved in the process, monetary amounts if relevant and even the consequences of missed deadlines. Other details could provide information regarding a due diligence review, asset evaluation, appraisal, purchase agreements and employment agreements, depending on what is transpiring.
Fourth Section: The conclusion should be professional and summarize the letter of intent. Contact information, either for the sender or the attorneys involved, should be included. This section should also offer a place for both parties to sign and date. A signed letter is evidence of the serious intent of the parties to complete the transaction. However, a letter of intent is not a binding contract.
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