Making an Initial Offer to the Target - 1

A common first step in a transaction is to negotiate a bilateral confidentiality agreement and letter of intent.

The acquirer has an incentive to avoid signing a letter of intent. But the target company or an interested seller is often unwilling to proceed without a written offer.



Letter of intent

The letter of intent lays out the principla areas of agreement between the two parties.

The letter of intent formally stipulates the reason for the agreement, major terms and conditions, the responsibilities of both parties while the agreement is in force, a reasonable expiration date, and how fees associated with the transaction weill be paid.

Major terms and conditions include a brief outline of the proposed structure of the transaction.

The proposed purchase price may be expressed as a specific dollar figure, as a range, or as a multiple of some measure of value. The letter of intent also specifies the types of data to be exchanged and the duration and extent of the initial due diligence