What You’ll Learn:
- What happens after LOI in a typical business sale deal
- How Acquira’s post-LOI is slightly different
- How you can team with Acquira to close your deal smoothly
- Ways Acquira assists business growth after the deal is closed
After you complete pre-LOI due diligence and get on board with the seller of a business, the next formal thing you want to do as an acquisition entrepreneur is send an LOI to the seller.
An LOI or Letter of Intent is a non-legally binding letter that shows the intention or agreement of the buyer about the prospective deal. Basically, this document outlines the terms and conditions of the business deal between the acquisition entrepreneur and seller.
At Acquira, we believe that it is 90% human interaction and only 10% of the legal process. The process of LOI is like that 90% human part where the seller and buyer interact with each other. They’re the ones who will actually close the deal. It is an opportunity to build trust with the seller of the business you’re interested in.
If LOI is to be summed up into two key points, it would be confidentiality and exclusivity. Confidentiality refers to binding both buyer and seller to let the air out before the deal is closed. On the other hand, exclusivity signifies that the seller cannot be looking out for other potential buyers of the business after signing of LOI.
So, it is how LOI works for a business deal. However, there are questions about how the process works after signing the LOI. How will the acquisition dealer help the entrepreneurs in closing the deal successfully?
After the Letter of Intent (LOI), What’s Next?
Typically, once the buyer and seller have signed the LOI, the next steps that come next are:
LOI issued
After several sessions of negotiations between the buyer, seller, legal counsel, and acquisition counsel, LOI is the first written agreement before closing the deal formally. LOI is very helpful as it binds the seller to not look for other buyers. At the same time, the confidentiality clause helps avoid any distortion or disturbance before the time.
The LOI is directed from the buyer to the seller showing their formal intent of buying the business. The seller agrees to it, and the LOI is issued.
This stage can be arduous or quick; it depends on the buyer, seller, and other factors. In general, it can take from a week to a month to sign and issue an LOI.
Due diligence follows
The post-LOI due diligence starts after the issuance of LOI. The period usually pertains from anywhere between one month to three months. In the post-LOI due diligence, a more detailed analysis of internal affairs is performed.
Any matter overlooked previously is analyzed again to get satisfaction about the true and fair view of information.
Payment is negotiated
Parallel to due diligence, the negotiations between the buyer and seller are going on about the purchase price and purchase agreement. Once a green signal has been given in the process of due diligence, a formal purchase agreement is designed according to the terms of the deal.
Besides, other additional agreements are also drafted, such as non-compete contracts, consultation contracts, etc.
Deal is closed
Closing the deal is a legal agreement that is performed by attorneys on both sides. The process takes anywhere within a week. The purchase amount agreed by the buyer and seller is paid by the buyer to the seller.
The payment is made at the convenience of buyers and sellers. At the same time, the ownership of business assets, stocks, and financial instruments is transferred to the buyer.
The Post-LOI Process in Acquira
What will the post-LOI process look like if you’re working with Acquira?
Step 1: Offer assessment
When an acquisition entrepreneur decides to work with Acquira, we work as partners. Having the right skill set and financial tools to read between the market lines, the process of offer assessment takes place.
Our team will have a one-on-one meeting with you to discuss the offer and determine the partnership services we’ll provide moving forward.
Acquira doesn't let you take all the burden on yourself. Therefore, we invest a minority share in every acquisition.
Step 2: Team up with Acquisition Entrepreneur
If we find that you and the deal are a great fit, Acquira becomes partners with you in the acquisition process. We will issue a formal Memorandum of Understanding (MOU) to the acquisition entrepreneur.
The MOU contains all the terms and conditions about Acquira’s level of investment and the level of services we plan to provide to the AE.
Step 3: Build the dream team
We will introduce you to our preferred legal counsel and Quality of Earning (QoE) consultant for future negotiations with sellers.
The legal counsel and QoE consultant will guide you through the potential problems and issues that might arise during the process of due diligence and negotiations with the sellers. Our consultants will be your team members until everything is clear in the due diligence (DD) and the formal purchase agreement gets drafted.
Step 4: Recommend SBA lenders
Depending on your investment needs and if lenders have not been engaged already, Acquira provides a list of recommended SBA lenders to the AE. You can scrutinize the ones that suit your investment needs and make your choice.
Step 5: Due diligence kick-start
Everything’s set up and it’s time for due diligence. This may be your first purchase and so you have little or no knowledge about what to look for during due diligence.
Acquira understands the financial complications and we have the right skill set for this. Therefore, we have created a due diligence checklist to help you begin the review process for the acquisition target.
Step 6: Meet lender requirements
The due diligence process is completed when you’ve reviewed the internal financial matters, organizational culture, and environment. If you’re satisfied, the next thing you need to do is get the funding. For that, you need to meet the lender’s requirements.
Now it’s time to put together an updated Pro-forma financial model and business plan. The lender requires these.
Step 7: Systemize
After everything has been prepared, we will analyze your future needs such as new recruitments, software and business tools to lend you a hand. Our head of systems will be the key resource here to guide you through the future course of action.
Step 8: Close deal and take ownership
Once the deal closes, we’ll share all of our systems for onboarding the deal and taking over the day-to-day.
Key Takeaways
From the Post LOI and growth process, you’ll find that:
- LOI is a non-legal binding agreement between buyer and seller that has two provisions of confidentiality and exclusivity.
- After your LOI is issued, the due diligence and purchase agreement process continues simultaneously, and then your deal is finally closed.
- At Acquira, the process is different because we will team up with you to provide you with the right set of tools and expertise in negotiation.
- The relationship with Acquira does not end with the closing of a deal. We provide ongoing guidance and consultation about the growth of your business.
