Knowledge base item

What's in a process letter?

The description of the sales process

After signing an NDA (non-disclosure agreement) the potential buyer will receive the process letter. The process letter describes how the sales process will look like with respect to the intended transaction.

The process letter describes the sales procedure based on five phases.

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Phase 1: The information memorandum and offer letter.

Theinformation memorandum contains a detailed description of the company's activities, strategy, results and forecasts. The offer letter describes the form of the transaction and other conditions for the sale.

Phase 2: Management meetings

If the potential buyer is still interested in the company after reading theinformation memorandum, management meetings are organized. During these meetings the buyer is given the opportunity to gather more information about the company by talking to the current management.

Phase 3: Non-binding indicative offer

By means of the non-binding offer the potential buyer indicates that he is interested in the company and wants to continue the process with the seller. In doing so, the potential buyer can make a proposal regarding the structure of the transaction and give an indication of the price he is willing to pay.

Phase 4: Due diligence & Phase 5: Binding offer

In the last two phases of the sales process, the examination of the books takes place followed by a binding offer. In these phases the earlier steps in the process - such as the non-binding offer - are examined and built on.

Tombstone

Everything in the process letter and the subsequent steps of the sales process are covered by the previously signed confidentiality agreement.

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Stef Kolen
Stef KolenCorporate Finance Advisor

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