There are typically 5 stages where your lawyer should be involved in the purchase or sale of a business:
- Letter of Intent (the initial offer);
- due diligence;
- drafting the agreements;
- closing the transaction; and
- attending to post closing matters.
Over the next few weeks we’ll be discussing each of these stages.
The first step is to prepare a Letter of Intent (“LOI”). The LOI is the initial offer and is usually not binding as the parties will enter into a more formal, binding agreement before completing the transaction.
The LOI should contain provisions regarding the price, method of payment, closing date and other agreements to be entered into by the parties in connection with the transaction.
A good LOI gives reassurance and certainty, focuses the parties, sets a timeline and identifies deal breakers. It is crucial to involve your lawyer when preparing or accepting a LOI to ensure the crucial details are covered and that they are valid and free of complications!!