Q:

What is a letter of intent to purchase?

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Quick Answer

A letter of intent to purchase is a formal business document that is issued from one firm to the enterprise it wishes to acquire. This is exchanged when a company buys outright the rights, assets and operational resources of another business. It lays out the intent to buy and the amount of the transaction taking place, as well as other stipulations and conditions involved in the agreement.

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Full Answer

Creating a letter of intent to purchase is the first formal step in creating a merger or acquisition between a private party or a corporation and another business. This requires that the legal aspects of such a purchase are already reviewed and the process is preliminarily set to proceed.

A letter of intent to purchase names the buyer and the company or items being bought. It lists the value of these assets, both liquid and otherwise, and provides a summary of what is to be paid for these resources. The document provides a timetable for the deal to be completed and serves as an initial phase in contract negotiations that signals an investor is fully committed to going ahead with the transaction. Such a letter also details the intended outcome of what the purchase is meant to accomplish.

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