M&A

The Letter of Intent (LOI) is not a mere formality, but a legal document that must be taken extremely seriously. In current deal practice, the LOI records the material terms of the (sale and purchase) transaction, and it is this document that determines who has control in the further acquisition process. Those who underestimate this lose substantial negotiating position before the next phases of the (sale and purchase) process even begin.

A key point of focus in the LOI is the purchase price. The seller often considers himself well off based on the purchase price stated in the LOI, but the purchase price in the LOI is almost never the amount received by the seller at the notarial transfer of shares. This often leads to disappointment for sellers who have not been properly advised during the LOI negotiations.

This blog is the first part of a four-part series on corporate acquisitions/(sale and purchase) transactions. In this series, we discuss the dealmakers and dealbreakers at various stages of the acquisition process that make the difference between a successful and unsuccessful deal.

In this first part, the Letter of Intent (LOI) takes centre stage. It is precisely in this phase that it is decided how much control the seller retains over the price, risks, and subsequent negotiations. In the following parts of this blog series, we will address other crucial components of the acquisition process.

In an acquisition, you want clarity in advance: which risks you deliberately assume, which you do not, and how you ensure that agreements are fulfilled without dispute. An escrow agreement provides exactly that. It creates a controlled financial buffer through which warranty claims can be settled without additional negotiations, delays, or legal escalation. For directors, this means direct risk management and reduced exposure afterward.