What is the primary purpose of a letter of intent in Mergers and Acquisitions?

The primary purpose of a letter of intent (LOI) in mergers and acquisitions is to present the buyer's offer in writing. An LOI serves as a preliminary agreement that outlines the framework for negotiations between the buyer and the seller. It typically includes key terms such as the proposed purchase price, payment structure, and other essential conditions, signaling the buyer's serious intention to move forward with the acquisition. The document also sets the stage for further due diligence and negotiation of final contracts.

While some options may reflect aspects of the overall M&A process, they do not capture the specific role of the LOI as effectively as the correct choice does. For example, finalizing the sale typically occurs after the LOI is agreed upon and negotiated into definitive agreements. Additionally, while disclosures of due diligence findings are crucial within the broader context of M&A, they are not the primary purpose of an LOI. Similarly, formalizing a partnership would pertain more to strategic alliances rather than an acquisition scenario, where a letter of intent specifically addresses the buyer's proposal for the purchase of the target company.