A letter of intent is used during the merger and acquisition process to establish the proposed terms and timing of a deal. The letter of intent lays the foundation for where the negotiation process will start. However, don’t get confused about the enforceability of the letter. A letter of intent is not a guarantee and is not final.

The letter of intent provides a road map of the intent of the acquirer. The letter can be of varying lengths depending on the dynamics of the negotiations and the desires of the parties involved.

In this article, we outline some of the common items that are often included in a basic letter of intent.

Transaction Structure

The transaction structure refers to what is the structure of the deal is proposed to be. Some examples include:

  • Is the purchaser acquiring the assets of the company?
  • Is the purchaser acquiring the shares in the company?
  • Will a merger be undertaken?

Proposed Terms

The price of the deal is obviously a key issue, but the letter of intent should also make clear:

  • If the price will be paid all in cash, stock or other means;
  • If the payment will it be paid upfront on settlement or as part of a deferred payment arrangement;
  • The process for valuing items such a stock inventory;
  • If a restraint of trade is required, and if so, the terms of the restraint;
  • For share sale agreements, how items such as retained earnings will be dealt with, and;
  • Who will attend to amounts owing such as debtors, creditors and employee entitlements.

Timeline for the Acquisition

A letter of intent should set expectations for when certain aspects of the purchase will be completed by, such as:

  • When due diligence information be made available to the buyer;
  • When due diligence is to be completed by;
  • The expected signing date of the acquisition agreement, and;
  • The expected settlement or completion date.

A well drafted letter of intent can increase the likelihood of an acquisition successfully closing on optimal terms.


Quinn M&A’s expert team of M&A advisors can assist you to with all aspects of the business acquisition process. Contact Quinn M&A today on +612 9223 9166 or submit an Express Enquiry to arrange a confidential no cost consultation with one of our Senior Advisors.