Letter of Intent (LOI) - Purchase / Acquisition of Business

The document titled 'Letter of Intent (LOI) - Purchase / Acquisition of Business' is a crucial document that outlines the general terms and conditions of a proposed acquisition of a business. It serves as a preliminary agreement between the buyer and the seller, setting the stage for further negotiations and the eventual completion of the transaction.

 

The entire document is divided into several sections, each addressing specific aspects of the proposed acquisition. The first section provides an introduction to the proposed transaction, highlighting the buyer's intention to acquire a certain percentage of interest in the target business. It also mentions the assets owned by the target that are essential for its business activities.

 

The second section focuses on the purchase price and payment terms. It specifies the aggregate consideration to be paid by the buyer for the proposed transaction, including the goodwill and other assets. It further outlines the payment schedule, including the deposit to be paid prior to the initiation of due diligence and the remaining purchase price to be paid on the signing date.

 

The third section discusses the transition period, which is the period between the execution of the LOI and the completion date or termination. During this period, the seller is expected to cooperate with the buyer to ensure the continued operation of the target business. It also mentions the changes that will occur in the management and authorized signatories of the target.

 

The fourth section highlights the importance of due diligence in the proposed transaction. It states that the completion of the transaction is subject to the satisfactory completion of due diligence by the buyer. It also imposes restrictions on the seller from engaging in discussions or agreements with any other party for the transfer or disposal of shares.

 

The fifth section addresses the termination of the proposed transaction. It states that the transaction will terminate if the completion is not done within a specified long stop period. It also mentions the refundability of the deposit, except in cases where the termination is solely attributable to the buyer's fault.

 

The sixth section outlines the closing conditions that need to be fulfilled for the completion of the transaction. These conditions include the validity of the target's licenses, the target's compliance with applicable laws and regulations, and the accuracy of the seller's representations and warranties.

 

The seventh section discusses the fees associated with the proposed transaction. It mentions the reimbursement of due diligence costs and expenses incurred by the seller if the buyer fails to sign the sales and purchase agreement within a specified period.

 

The eighth section addresses the requirement for third-party approvals, such as consents from partners and regulatory authorities. It emphasizes the importance of obtaining these approvals before the completion of the transaction.

 

The ninth section focuses on confidentiality and announcements. It states that both parties are obligated to keep the information obtained during the negotiation and implementation of the acquisition confidential, except in certain specified circumstances.

 

The tenth section mentions the jurisdiction clause for dispute resolution, indicating the applicable laws and jurisdiction for resolving any disputes arising from the proposed transaction.

 

The eleventh section clarifies that the LOI is not legally binding and creates no legal obligations, except for the provisions related to confidentiality, termination, deposit, abort fee, and governing law. It emphasizes that the proposed transaction will only proceed if and when definitive legally binding transaction documents are agreed upon and executed by the parties.

 

The twelfth section briefly mentions the tax and stamp duty responsibilities of each party involved in the proposed transaction.

 

In summary, the 'Letter of Intent (LOI) - Purchase / Acquisition of Business' is a detailed document that covers various aspects of a proposed acquisition. It provides a comprehensive overview of the terms and conditions, payment terms, transition period, due diligence, termination, closing conditions, confidentiality, and other important considerations related to the transaction.

How to use this document?

1. Review the proposed transaction: Familiarize yourself with the general terms and conditions outlined in the LOI, including the percentage of interest to be acquired and the assets involved.

2. Understand the purchase price and payment terms: Take note of the aggregate consideration to be paid, including the goodwill and other assets. Pay attention to the payment schedule, including the deposit and the remaining purchase price.

3. Cooperate during the transition period: During the transition period, ensure the continued operation of the target business and cooperate with the buyer. Make necessary arrangements for the management and authorized signatories.

4. Facilitate due diligence: Understand the importance of due diligence in the proposed transaction. Cooperate with the buyer and provide necessary information to facilitate the due diligence process.

5. Be aware of termination conditions: Familiarize yourself with the conditions that may lead to the termination of the proposed transaction. Understand the refundability of the deposit and the circumstances in which the termination may be solely attributable to the buyer's fault.

6. Fulfill closing conditions: Ensure that the closing conditions mentioned in the LOI are met, including the validity of licenses, compliance with laws and regulations, and accuracy of representations and warranties.

7. Seek necessary approvals: Identify any third-party consents or approvals that may be required, such as consents from partners or regulatory authorities. Work towards obtaining these approvals in a timely manner.

8. Maintain confidentiality: Keep all information obtained during the negotiation and implementation of the acquisition confidential, unless required by law or with the other party's approval.

9. Understand dispute resolution: Familiarize yourself with the jurisdiction clause for resolving any disputes that may arise from the proposed transaction.

10. Clarify legal obligations: Understand that the LOI is not legally binding and creates no legal obligations, except for specific provisions. Be prepared to proceed with definitive transaction documents if the proposed transaction moves forward.

11. Consider tax and stamp duty responsibilities: Be aware of your own tax obligations and the shared responsibility for stamp duty related to the proposed transaction.