Once the buyer and seller have moved past the very basic step of sharing and reviewing information (typically under the protection of a confidentiality agreement), then they may begin to discuss specific terms of the deal.  Before the parties go through the time and expense of putting together a formal asset purchase agreement, the next step would be for the prospective buyer to put together a letter of intent addressed to the seller.  In the letter of intent, the buyer can set out all of the basic terms of the deal:  what assets are being purchased, the purchase price, due diligence requirements, closing contingences, and any other points of the deal that the buyer wants included.  This letter of intent is nonbinding, which means that either party is still free to change their minds at any time before the final asset purchase agreement is signed.  However, the letter of intent is a good way for the parties to have a written starting point for discussing the terms of the deal.  Once the terms in the letter of intent are agreed upon by both parties, then the process of drafting and negotiating an asset purchase agreement is much more smooth and efficient.

By taking this preliminary step early on in the purchase and sale of a business, both parties can save themselves from spending a lot of resources on a transaction that is doomed to failure and can move forward in a manner that is safe and efficient for both parties. If you have questions about buying or selling a business, feel free to contact a Bamberger attorney.

Author: Laura A. Scott (bio)
Phone: 812.452.3557
email: lscott@bamberger.com