A Letter Of Intent To Purchase Business is a crucial preliminary document used in Nigerian business acquisitions to establish the framework for negotiations between potential buyers and sellers. This document is typically used when a serious buyer has identified a target business and wants to formalize their interest while maintaining confidentiality and potentially securing exclusivity for detailed discussions. Operating under Nigerian law, particularly the Companies and Allied Matters Act (CAMA) 2020 and related commercial legislation, it outlines key terms such as proposed purchase price, payment structure, and timeline for due diligence. While mostly non-binding, certain provisions like confidentiality and exclusivity clauses are usually binding. The document serves as a stepping stone toward a definitive purchase agreement and helps align parties' expectations early in the acquisition process.
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1. Opening and Date: Formal business letter opening with date and addresses of both parties
2. Subject Line: Clear indication that this is a Letter of Intent to Purchase Business
3. Introduction: Identifies the parties and their roles (buyer/seller)
4. Business Description: Brief description of the target business, including its legal name, location, and nature of operations
5. Purchase Intent: Clear statement of intention to purchase the business
6. Key Terms: Outline of fundamental terms including proposed purchase price, payment structure, and what is included in the sale
7. Due Diligence: Statement regarding the buyer's right to conduct due diligence and expected timeframe
8. Exclusivity Period: Specified period during which the seller agrees not to negotiate with other potential buyers
9. Confidentiality: Statement regarding the confidential nature of negotiations and information shared
10. Timeline: Proposed timeline for completing due diligence and executing definitive agreements
11. Non-Binding Nature: Clear statement that the letter is non-binding except for specific clauses (like confidentiality and exclusivity)
12. Closing: Signature blocks and formal letter closing
1. Employee Retention: Include when there are key employees crucial to the business operation that the buyer wishes to retain
2. Regulatory Approvals: Include when the transaction requires specific regulatory clearances or licenses
3. Intellectual Property: Include when the business has significant IP assets that need special mention
4. Real Estate: Include when the business premises are owned and part of the transaction
5. Financing Contingency: Include when the purchase is contingent on the buyer securing specific financing
6. Non-Compete Provisions: Include when the buyer wants preliminary agreement on non-compete terms with the seller
7. Earn-out Structure: Include when part of the purchase price will be based on future performance
1. Schedule A - Assets Overview: High-level list of major assets included in the proposed transaction
2. Schedule B - Excluded Assets: List of specific assets that will not be included in the sale
3. Schedule C - Key Financial Information: Summary of critical financial metrics and performance indicators
4. Appendix 1 - Proposed Timeline: Detailed timeline showing key milestones through to completion
5. Appendix 2 - Due Diligence Requirements: Initial list of documents and information required for due diligence
6. Appendix 3 - Key Employees: List of key employees and their roles (if employee retention is relevant)
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