The Letter of Intent to Purchase Business is a crucial initial document in business acquisition transactions in the Philippines. It is typically used after preliminary discussions between parties but before detailed due diligence and final negotiations commence. This document serves multiple purposes: it demonstrates serious intent to pursue the transaction, outlines key terms and conditions, establishes a framework for due diligence, and may secure temporary exclusivity for the potential buyer. While governed by Philippine law, particularly the Civil Code and Corporation Code, the letter remains largely non-binding except for specific provisions like confidentiality. It's an essential tool for both domestic and foreign investors interested in acquiring Philippine businesses, though foreign investors must pay special attention to ownership restrictions in certain industries. The document typically precedes more detailed agreements such as the definitive purchase agreement.
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1. Letter Header: Date, recipient's name, title, company name, and address
2. Subject Line: Clear indication that this is a Letter of Intent to Purchase Business
3. Opening Paragraph: Introduction of the parties and purpose of the letter
4. Business Description: Clear identification of the business being considered for purchase
5. Purchase Price and Terms: Proposed purchase price, payment terms, and any price adjustment mechanisms
6. Transaction Structure: Whether it's an asset or share purchase, and key elements of the proposed transaction
7. Due Diligence: Outline of the due diligence process and requirements
8. Timeline: Proposed schedule for due diligence, negotiations, and closing
9. Confidentiality: Statement regarding the confidential nature of discussions and information
10. Exclusivity: Any exclusive negotiation period if applicable
11. Closing Conditions: Key conditions that must be met to proceed with the transaction
12. Non-Binding Nature: Clear statement about which provisions are binding and non-binding
13. Closing Paragraph: Next steps and contact information
14. Signature Blocks: Space for both parties to sign and date the letter
1. Employee Matters: Used when there are specific intentions regarding retention of employees or management
2. Regulatory Approvals: Include when the transaction requires specific regulatory clearances
3. Financing Contingency: Include when the purchase is subject to the buyer obtaining financing
4. Asset Inclusion/Exclusion: Used when specific assets need to be called out as included or excluded from the potential transaction
5. Post-Closing Operations: Include when there are specific intentions regarding business operations after closing
6. Break-Up Fee: Used when parties want to include provisions for compensation if the deal doesn't proceed under certain circumstances
7. Seller's Non-Compete: Include when preliminary agreement on non-compete terms is important
1. Schedule A - Business Assets: Preliminary list of major assets included in the potential transaction
2. Schedule B - Purchase Price Calculation: Detail of how the purchase price was determined and any adjustments
3. Schedule C - Due Diligence Requirements: List of documents and information required for due diligence
4. Schedule D - Key Employees: List of key employees and any specific arrangements proposed
5. Appendix 1 - Timeline: Detailed timeline of key dates and milestones
6. Appendix 2 - Required Approvals: List of anticipated regulatory and third-party approvals needed
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