Selling Your Business: What to Know about the Due Diligence Process

Some of the things that a letter of intent should include are:

• The type of business deal you’ll be entering.
• The purchase price for the practice.
• An explanation of the assumptions upon which the purchase price is based. (During due diligence, it may turn out that some of the assumptions that were used to calculate the purchase price may not be accurate.)
• Preliminary timeframes about future negotiations, although the letter should note that these may be subject to change.
• A short notice that states each party will cover costs for its own legal, travel, and accounting expenses during negotiations for the sale of the business.
• Any contingencies that must be in place for the sale to continue. Common contingencies include the sale depending on the buyer’s ability to get financing or the buyer’s satisfaction with due diligence.
• Any sub-agreements, sometimes called restrictive covenants. Be careful however, because while a letter of intent isn’t binding, restrictive covenants are. These might include a nondisclosure agreement that prohibits both parties from using information shared during the negotiations for any other purpose or a date by which the deal should be concluded.