Making an Offer in M&A Transactions

A Buyer will typically make its offer by presenting an “offer letter” or “letter of intent” containing the terms of its offer. It is not legally binding but will be heavily relied upon by the attorneys when drafting the transaction documents as well as the target company in deciding on whether to accept the offer. Keep in mind that there are many different ways to skin a cat, and readily available cash is not always a necessary component to acquire a business. See, “Is Capital Required for business acquisition?”

Even though the offer letter is non-binding in nature, it’s always my recommendation that as many key terms of the transaction are negotiated and agreed to during this stage of the transaction. If you leave it up to the document drafting phase, not only will it increase the uncertainty of the transaction, it will also increase the cost significantly.

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