One of the key parts of any transaction is the Letter of Intent (LOI). This is the starting document that outlines the terms of the deal.
Fundamentally, this will set the tone and expectations for the entire transaction process. Buyers and Sellers will agree to proceed with a deal based upon the terms set out in the LOI. It is important to ensure all of the terms are well understood by all parties.
The LOI is much more than just the price the buyer is willing to pay. Price is only one key part of a transaction. The final decision to proceed with a price offered depends upon the other parameters offered. For example – will the buyer proceed without a pre-purchase inspection or is there a long and drawn out inspection that will take place? Where is the delivery location and who is paying for the flight there? Are there long warranties of title that are non-standard in the business? All of these items have an effect upon the commerciality of the deal and the price and should be included in the LOI.
Keep in mind, a Letter of Intent should be a blueprint and road map for a transaction. It should show the major points you want from start to finish. As a buyer or seller, spend some time thinking through the items you want to see at all phases of the deal and include those in the LOI. The more thought you put into the LOI, the easier the entire deal will be. All sides will know what to expect and how to proceed throughout the transaction.
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