A Letter of Intent (LOI) to buy a business or its assets may or may not include an expiration date and time.
When the Letter of Intent expiration date and time is defined, the buyer is putting the seller on notice that he or she must either agree to the terms defined in the letter or lose the opportunity to sell the business to the buyer authoring the LOI.
It’s important for the entrepreneur selling his business to understand that the terms defined in the Letter of Intent are negotiable and should be considered carefully and explored with his or her Merger & Acquisition Attorney and CPA. While a Letter of Intent is generally not binding on either party, it defines various deal points important to both the seller and buyer.
Why Include an Expiration in an LOI?
Business buyers may choose to include the expiration date and time in the Letter of Intent because they are actively pursuing the acquisition of several businesses at the same time. If such a buyer did not include an expiration date in the letter, then the deal terms defined may be considered inappropriately by the seller as an ‘offer on the table’ indefinitely.
Buyers who are actively seeking targeted businesses for sale will include the expiration date and time so they may move on to other prospects in a timely manner if the deal terms are not acceptable to the seller.
Typically, a buyer would state its Letter of Intent is open for acceptance for 72 to 96 hours, or in some cases a one-to-two weeks.
