The Non-Binding Offer
The agreement of key terms in the Letter of Intent (LOI) or the Non-Binding Offer (NBO) is a necessity.
Until the NBO is signed, the seller can haggle and put forward their terms. Once it is signed, the ball is in the investor's court, as the acquirer will more often than not require exclusive terms that prohibit the seller from negotiating with other bidders for a certain period. The LOI/NBO must specify, among other things, the price and the method of payment, as well as the methods of calculating the price adjustment; the scope and duration of the exclusivity clause; the non-binding nature of the terms; the remedies for breach of agreement, etc. A well-drafted Letter of Intent or Non-Binding Offer significantly reduces the time required to complete the transaction and increases the likelihood of successful closing.