Drafting Letters of Intent for asset purchases requires careful attention to numerous deal terms, legal provisions, and protective clauses. Attorneys spend hours customizing templates, ensuring consistency across sections, and balancing binding versus non-binding provisions while managing client expectations and tight transaction timelines.
Drafting comprehensive Letters of Intent for asset purchases requires balancing non-binding business terms with binding protective provisions like exclusivity and confidentiality. Attorneys spend hours ensuring proper liability allocation, tax planning frameworks, and transaction-specific provisions while maintaining the delicate tone needed for successful M&A negotiations.
CaseMark automates LOI drafting by extracting deal terms from your documents and generating comprehensive letters that properly distinguish binding from non-binding provisions. The AI ensures all critical elements—from asset descriptions to non-compete terms—are addressed while maintaining the professional tone essential for transaction success.
This workflow is applicable across multiple practice areas and use cases
LOIs are foundational documents in M&A transactions, establishing preliminary terms before definitive purchase agreements. This workflow directly supports M&A attorneys drafting initial transaction documents for asset acquisitions.
Asset purchases are a core component of M&A practice, and LOIs are typically the first formal document in any M&A transaction. The workflow's focus on exclusivity, due diligence periods, and binding/non-binding provisions are essential M&A concepts.
Private equity firms regularly acquire portfolio company assets and need LOIs to structure acquisitions, establish exclusivity periods, and outline purchase price allocations before definitive agreements.
The target personas explicitly include in-house legal teams at private equity firms, and PE transactions frequently involve asset purchases requiring preliminary LOIs with sophisticated terms around due diligence and deal structure.
Corporate attorneys advising businesses on acquisitions, divestitures, or strategic transactions need LOIs to memorialize preliminary deal terms and protect client interests during negotiations.
General corporate practice encompasses business transactions and strategic deals where asset purchase LOIs are common preliminary documents, particularly for middle-market companies and corporate counsel managing acquisitions.
Franchise attorneys representing buyers acquiring existing franchise locations or franchise systems often use asset purchase LOIs to outline terms for acquiring franchise assets, customer lists, and operational equipment.
Franchise acquisitions frequently involve asset purchases rather than stock purchases, requiring LOIs that address specific assets like franchise rights, equipment, and goodwill while excluding certain liabilities.
Typically, only specific provisions are binding including confidentiality obligations, exclusivity and no-shop commitments, allocation of transaction costs, and governing law provisions. All business terms like purchase price, asset descriptions, and closing conditions are non-binding expressions of intent until a definitive purchase agreement is executed. CaseMark clearly delineates these distinctions in the generated LOI to prevent misunderstandings.
The exclusivity period typically ranges from 30 to 90 days depending on transaction complexity and due diligence scope. The period should be long enough for the buyer to complete investigation and negotiate definitive agreements, but not so long that it unreasonably restricts the seller if negotiations fail. CaseMark helps you calibrate the exclusivity duration based on your specific transaction timeline and due diligence requirements.
In asset purchases, the buyer typically acquires only specified assets and assumes only explicitly identified liabilities, leaving all other obligations with the seller. Assumed liabilities might include obligations under assigned contracts or specific identified debts, while excluded liabilities typically include accounts payable, tax obligations, litigation, and employee liabilities existing before closing. This structure is a key advantage of asset purchases over stock acquisitions and must be clearly articulated in the LOI.
IRC Section 1060 requires purchase price allocation across seven asset classes, from cash and deposits to goodwill and going concern value. Buyers generally prefer allocating more to depreciable assets, while sellers may have different preferences based on their tax situation. The LOI should acknowledge that parties will negotiate a compliant allocation and report consistently on IRS Form 8594, with final allocation typically determined during definitive agreement negotiations after complete asset valuations are available.
The seller should provide reasonable access to business premises, all books and records, contracts, financial statements, employee information, customer and supplier data, and intellectual property documentation. Access should be structured to avoid business disruption, with site visits scheduled in advance and sensitive customer contacts limited until later stages. CaseMark generates due diligence provisions that balance the buyer's need for comprehensive investigation with the seller's need to protect confidentiality and maintain normal operations.