Letters of Intent in Mergers and Acquisitions

In acquisitions of privately held companies, an acquisition letter of intent/term sheet is often entered into by both parties. The purpose of the letter of intent is to ensure there is a “meeting of the minds” on price and key terms before the parties expend significant resources and legal fees in pursuing an acquisition, and before sellers agree to grant exclusivity to buyers.

The purpose of this article is to explore the key issues in negotiating and drafting an acquisition letter of intent.

What Is Typically Included in an Acquisition Letter of Intent?

A letter of intent can be short or long, depending on the dynamics of the negotiations and the desires of the parties. Here are the types of items that can be included in a letter of intent, a number of which are discussed in greater detail later in this article:

• Price/Consideration: Will it be all cash, all or part stock, earnout, or promissory note?
• Transaction structure: Will it be an asset purchase, purchase of all outstanding shares, or a merger?
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