Knowledge base item

An LOI - what's that?

Declaring the intention to take over

A Letter Of Intent (LOI) is often used prior to a company takeover or joint venture. This Letter of Intent is an important document for a successful acquisition. In this document one party undertakes to do business with another party. The document is often drafted to work out the broad outlines of a deal, before moving on to the details. It allows for a number of essential agreements to be made so that both parties can achieve their intended goal.

A signed LOI ensures exclusivity and thus gives a buying party extra security. By signing an LOI, the seller binds himself directly to the intended buyer and can only negotiate with him or her. A strong sense of trust is a prerequisite for this, as a seller will only be prepared to proceed with one party if he or she is certain that this party has the best chances of success.

The content of an LOI can vary greatly from one transaction to another.

The content of an LOI can vary greatly and depends on the intended purpose of the transaction. There are, however, a number of things that often recur in an LOI. These include the form of the transaction, a confidentiality agreement and a timetable including follow-up steps.

In addition, an LOI can be either binding or non-binding. This will depend on how the LOI is written. A buyer will often benefit from the fact that the LOI is non-binding, so that he can still withdraw from the negotiations at a later date. On the other hand, the seller wants the buyer to commit himself as much as possible.

In addition to theinformation memorandum and theNon-Binding Offer, the LOI is an important document in the acquisition process. Clear agreements and good wording are essential. A good LOI is written transparently and neutrally and is therefore to the advantage of both parties. It is therefore important to draw up an LOI carefully. If an LOI is drafted in cooperation with an advisor, the advisor can ensure that all your interests are represented at the start of this intensive process.

This advisor could be Florijnz. There are "sales-friendly" LOIs and "buyer-friendly LOIs". Naturally, we determine our position based on the party we represent. At the same time, our efforts are always aimed at a sustainable transaction: an agreement that both parties look back on with a good feeling even after the transaction. A transaction is only successful if, in addition to the price, many other matters have also been properly arranged.

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