The Acquisition Letter of Intent is a crucial preliminary document in Canadian M&A transactions, typically used when a potential buyer wishes to formally express their serious intention to acquire a business while setting out the fundamental terms of the proposed deal. This document, while generally non-binding except for specific provisions (such as confidentiality and exclusivity), serves multiple important purposes: it demonstrates commitment, outlines key commercial terms, establishes a framework for due diligence, and provides a basis for obtaining preliminary regulatory approvals or financing commitments. The LOI must comply with Canadian federal and provincial laws, including competition laws, securities regulations, and corporate laws. It's particularly important in complex transactions where parties need to agree on basic terms before investing significant resources in detailed due diligence and definitive agreement preparation.
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1. Date and Parties: Opening of letter identifying the date and full legal names and addresses of both parties (buyer and seller)
2. Introduction: Brief statement of intent to acquire the target business/assets
3. Transaction Overview: High-level description of the proposed transaction structure and what is being acquired
4. Purchase Price: Proposed purchase price, including any adjustments, earnouts, or payment structures
5. Key Terms: Essential commercial terms including timing, conditions precedent, and any major assumptions
6. Due Diligence: Outline of the due diligence process, timeline, and access requirements
7. Exclusivity: Period during which the seller cannot negotiate with other potential buyers
8. Confidentiality: Reference to existing or included confidentiality provisions
9. Timeline: Key dates and proposed closing timeline
10. Binding/Non-binding Provisions: Clear statement of which provisions are binding and non-binding
11. Closing: Signature blocks and formal closing of the letter
1. Break Fee: Terms of any break fee payable if either party terminates negotiations, used in larger transactions
2. Financing: Details of how the acquisition will be financed, included if financing is a key condition
3. Employee Matters: Key terms regarding retention of employees, if this is a critical aspect of the deal
4. Regulatory Approvals: Listed if specific regulatory approvals are required for the transaction
5. Governing Law: Specification of applicable law and jurisdiction, included if parties are in different jurisdictions
6. Costs: Agreement on who bears transaction costs, included for larger transactions
7. Material Adverse Change: Conditions under which the buyer can withdraw, included for longer negotiation periods
1. Assets Schedule: Preliminary list of key assets to be acquired
2. Price Calculation: Details of purchase price calculation methodology and adjustments
3. Timeline Schedule: Detailed timeline of key dates and milestones
4. Due Diligence Requirements: List of required due diligence items and information
5. Key Employees: List of key employees and any special arrangements
6. Required Consents: List of third-party consents needed for the transaction
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