Letters of intent can contain “bare bone” terms or detailed terms for the transaction. Provisions of exclusivity, confidentiality and payment of expenses are the only binding provisions in a letter of intent.
In this video, Anjana D. Patel, JD, discusses the importance of letters of intent in a private equity transaction.
“A letter of intent is essentially a signed letter agreement between a buyer and a seller setting forth the mutually agreed upon terms by which they want to do a transaction,” Patel, a member of the firm in the health care and life sciences practice of Epstein Becker Green, told Healio.
Once a letter of intent is signed, Patel noted the buyer and seller can begin an extensive due diligence review and production process.
“The due diligence production entails detailed questions from the buyer, both financial and legal, and it requires a seller to use considerable resources, time and expense to respond to those questions,” Patel said. “The minute the letter of intent is signed and the exclusivity period begins, that starts the clock running on both sides deploying all of these resources and assets to start the transaction process.”