Letter of Intent
(Stock Acquisition)

Summary

This template is a letter of intent to acquire a target company by the purchase of all of its issued and outstanding capital stock, memorializing the buyer and sellers' preliminary understandings with respect to key transaction terms. This template includes practical guidance, drafting notes, and alternate clauses. A letter of intent is usually nonbinding in whole or in part. Binding terms may include expense reimbursement, exclusivity, dispute resolution, entire agreement clauses, and other "miscellaneous" provisions. Nonbinding terms usually include transaction-specific terms that need to be fully documented in definitive agreements before they become binding. A letter of intent also may take the form of, or be called, a memorandum of understanding or term sheet. There are many reasons why transaction parties may elect to use a letter of intent, including that a letter of intent can: • Identify "deal breakers" early on in the transaction process by forcing the parties to outline major deal points • Serve as a guide for the timing and process of a transaction, including by describing how the due diligence process will function and setting out any target dates for execution or closing • Create certain critical binding obligations even before the primary deal document stage, such as confidentiality, exclusivity, and cost allocation • Create "moral" (even if not binding) obligations between the parties, such as a duty to negotiate in good faith–and- • Address any known special circumstances unique to the particular deal early on in the process. However, a letter of intent may not always be the best or most strategic choice for the parties. In a transaction with a tight timeline, a letter of intent may slow down the transaction process. Without a letter of intent, parties can move directly to drafting and negotiating the primary deal document, rather than taking the time to negotiate the letter of intent. In addition, because letters of intent take time to negotiate, they also may create unnecessary costs. Finally, negotiating and executing a letter of intent could potentially trigger certain reporting obligations (to the extent it may contain binding provisions that would constitute a material agreement or event for the public company) if any of the transaction parties is a public company. You should consult with your securities counsel with respect to your disclosure obligations. This template assumes that the proposed transaction will involve only one buyer and one seller, but may be revised easily to reflect the acquisition of the target company from multiple selling stockholders. The provisions of this template are generally neutral. You can use the alternate clauses, or make changes directly to the default language in this template as directed by the drafting notes, to adjust this template to be more pro-target or pro-acquirer. You should be sure to tailor all business terms in this template to reflect your client's planned transaction. For a full listing of related stock acquisition content, see Stock Acquisition Resource Kit, and for a full listing of related private equity content, see Private Equity Transactions Resource Kit. For more information, see Letters of Intent in Private M&A Deals, Letters of Intent in Public M&A Deals, and Term Sheets. For additional templates, see Letter of Intent (Asset Acquisition), Letter of Intent to Acquire a Public Company by Merger, and Term Sheet (Stock Purchase) (Private Equity Buyer). Click here to see recent examples of publicly filed stock purchase agreements in Market Standards - M&A, the Practical Guidance database of publicly filed M&A deals that enables users to search, compare, and analyze transactions using 150+ M&A deal points to filter search results. You can customize any search to your needs by adding filters or modifying the search criteria.