How To Sign Iowa Banking Letter Of Intent

How to industry sign banking iowa letter of intent

hi it's Nick javac with ppm templates today we're going to talk about a blueprint for the letter of intent first of all what is a letter of intent so if you're gonna make a acquisition of a company a letter intent is that written agreement that sets forth the preliminary understanding between you the buyer and the seller it helps frame what the transaction will look like the price to be paid the form of the payment the structure of the transaction and also provides a roadmap to closing typically the LOI is sent to the investment banker if there is one or broker after you've visited the company and have had a chance to meet with management and go through the management presentation one thing we used to like to do is in the preamble to the actual terms you know struck the ego of the seller a little bit you know thanking them for their time and commenting on the business that they've built you also want to qualify your offer as being based on the offering memorandum that was prepared by the investment banker conversations that you've had with management or management's representatives and then any other additional information that you've received so now let's get into the terms purchase price describe how much you're offering and whether it is for equity or assets and if it is a stock deal whether you're acquiring a hundred percent of the stock or some lesser amount debt in cash make clear that you are acquiring the business debt-free and that the owner can distribute any unrestricted cash to the owners if there's going to be a new president CEO you'll want to discuss it in this section or if the current president CEO will continue in the current role mentioned that as well senior management talked about your expectations about the current senior management team in terms of roles and compensation and with respect to compensation you don't have to spell out specifics but rather just have a general statement on comp senior management equity if you're going to make equity co-investment available to the senior management team discuss it here incentive stock for senior management if you intend to incentivize senior management with equity equity brief describe what that plan would look like in other words will it consist of options how many options and over what you know how many years will it consist of restricted restricted stock and what the vesting period will look like capital discuss how you'll be financing your acquisition so here depending on the sellers advisor more or less detail will be required sometimes a very general statement will suffice and then other times a real breakdown of the capital structure will be required in other words you know how much equity how much debt how much subordinated debt and then who is sometimes they'll even want to know you know where the capital is coming from closing balance sheet set forth your expectations of what working capital should be at closing prefaced with a comment that it's based on historical performance and current trends you also want to carve out a crew tax on taxable income this should be the responsibility of the seller GAAP this is an important one make clear that the financials the closing balance sheet and any related supplemental information is presented and interpreted in accordance with generally accepted accounting principles if you're going to have any non-compete agreements you'll want to put them in this section here under non-compete agreements reps and warranties they're as usual there's a usual and customary basket for represent warranties and that includes collectability of accounts receivable usability of inventory that the PP&E is in sound in working condition and that it is free and clear of any liens and encumbrances that there's an assign ability of material agreements no environmental liabilities and that there's no material adverse change or Mac into business or prospects of the business so that's the end of part one look for part two on the letter of intent blueprint if you just want to get down to the business of writing your LOI you will find our LOI templates just what you're looking for easy to use in familiar word format and they won't bust your Banco 2ww ppm let's calm this is Nick javac thanks for watching