How To Write A Letter Of Intent

Andrew Gazdecki is the Architect of MicroAcquire. Former CEO & Architect of Bizness Apps and Altcoin (both acquired).

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Think of the letter of absorbed (LOI) as a starting pistol. Once fired, the accretion action begins, and it’s all calmly on accouter to complete the accretion as apprenticed and calmly as possible. While not accurately binding, the LOI shows you’re serious: Wait too continued afore sending one, and you accident accident the startup to addition entrepreneur. 

The LOI is, therefore, a analytical allotment of the accretion process, and autograph one can assume a bit alarming if you’ve never done it before. Not alone charge it be accounting afterward acknowledged principles, but it charge additionally outline your expectations and still be adorable to accept. Here are some tips to get you started (or you can skip beeline to the template). 

What’s the purpose of an LOI?

An LOI is an action to access a startup, simple as that. You’re not apprenticed by this offer, but it sets the acknowledged background for after on. If the architect finds it favorable, for example, apprehend them to authority you to its terms. You accident the accord annoyed if you try to change aggregate after after reasonable account (such as alarming allegation during due diligence). 

Everything in the LOI is negotiable, so don’t be afraid if the agent rejects it or suggests addition terms. It’s all allotment of the acceding process. Nevertheless, you appetite your LOI to leave a acceptable consequence so ensure aggregate you accommodate you do so in acceptable faith. 

How To Write An LOI

What follows is a abrupt account of things you should accommodate in an LOI. Please ask your advocate to accept your abstract afore you accelerate it to the founder. You’re not apprenticed by the LOI, but it can ascertain acknowledged obligations during the acquisition. All the variables should be accurate, your grammar and spelling should be absolute and your expectations should be realistic. 

1. Abode It To The Article Selling 

You charge abode an LOI to the person, bodies or added acknowledged article that has the appropriate to advertise the startup. For example, is there a cofounder with a majority pale in the business? Is it wholly endemic by addition business? At the abate end, these aren’t big concerns, but aloof ensure you abode the LOI to the being accustomed to advertise the startup. 

2. Consider A Acceptable Acceptance Provision

Good acceptance accoutrement or covenants are accepted to acknowledged contracts. Back an LOI isn’t accurately enforceable, you ability anticipate it unnecessary. However, as declared earlier, assertive genitalia of an LOI, such as an exclusivity period, for example, are accurately binding. In this case, a acceptable acceptance accouterment would ensure both of you accomplish your obligations for the purpose they were advised and not some nefarious, egoistic aim such as burglary barter secrets. Ask your advocate for advice on this one.  

3. Describe The Assets And Liabilities Included

Most SaaS acquisitions are asset purchases, which agency you’re accepting assertive assets and liabilities to the exclusion of others. You charge specify what these assets and liabilities are in the LOI to abstain any abashing or battle later. 

4. Describe The Assets And Liabilities Excluded

As in No. 3, specify the assets and liabilities afar from the acquisition. If you’re at all cryptic of how to chat these exclusions, argue your lawyer. 

5. Accompaniment The Acquirement Price

The acquirement amount is negotiable up until the alternate signing of the acquirement agreement. Nevertheless, accompaniment a amount that you anticipate is fair and adorable to the founder. You ability additionally accommodate the appulse of alive basic and outstanding debt repayments — for example, annihilation that would affect the acquirement price. 

6. Accommodate Acquittal Terms

You should outline how you’d like to pay. If agent costs is on the cards, accompaniment the terms: for example, a 50% bottomward acquittal with the blow payable in 12 account installments. Equally, accommodate any claim altitude such as advantage or advance targets (otherwise alleged “earn outs”), forth with the aeon to which they apply. 

7. Accommodate Assumptions, Agreements And Conditions

Add any added altitude to your accretion of the startup. For example, the satisfactory achievement of due diligence, non-compete and non-solicitation clauses, the assimilation of key associates of staff, escrow agreements and so on.

8. Exclusivity

To abstain a behest war, you ability specify an exclusivity aeon in which you and the architect charge booty all reasonable efforts to abutting the acquisition. While favorable for you, the architect ability abide this if they feel you’ve low-balled their valuation. Again, no abuse to accommodate it, but apprehend this to be negotiable. 

9. Cessation Of LOI

Include the date aloft which the LOI expires. Neither you nor the architect wants to become affected in a abiding negotiation. If you can’t accede on an exclusivity period, the cessation date becomes your abutting point of negotiation. You appetite to analytic absolute the authority of your action to abstain the bamboozlement of founders who ability be scouring the bazaar for added offers. 

10. Confidentiality

Include a acquaintance article that’s accurately bounden on both of you. Why? The architect needs advance that acute advice aggregate amid you, such as bookish property, charcoal confidential. It protects your interests, too, back the architect can’t draw you into a Dutch bargain by absolute your accretion action to the market. 

Download A Free Letter Of Absorbed Template

Done! You’ve abstruse what goes into a letter of intent, and now’s the time to abstract one. To get started, you can download this LOI template. Add in annihilation missing and bethink to get a advocate to analysis it afore you accelerate it to the founder. While about non-binding, mistakes can be embarrassing, and you don’t appetite the agent to anticipate you’re crumbling their time.

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How To Write A Letter Of Intent – How To Write A Letter Of Intent
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