It’s not every day you get to announce a big milestone like this one.
As you know, we’ve been working hard to consolidate and standardize each stage of the acquisition process so it’s fast, easy, and transparent.
Today, we’re another step closer to that goal. We’ve streamlined the first legal stage of an acquisition: the letter of intent (LOI), which is an offer from you to a founder.
Picture it: You’ve spent weeks narrowing down your startup shortlist to find your ideal match. You’re ready to send a letter of intent (LOI) that outlines your offer and terms, kicking off negotiations with the founder. But if you’ve never drafted one before, they can be time-consuming and complex, and delays or mistakes might slow or even derail talks.
To help you close on your favorite startup, we’ve developed an LOI Builder that allows you to create and send a formal acquisition offer in as little as five minutes. Fill out a few fields and the LOI Builder will generate an LOI for you to digitally sign and send to the founder. You then spend less time correcting errors or omissions and more time negotiating the best deal.
Drafting legal documents can be daunting, so the LOI Builder guides you through each stage of an LOI with jargon-free explainers. And although simple, our legal counsel, James Graves, and the product team developed the LOI Builder to fit over 80 percent of listed startups. That said, please consult your own lawyer if you’re unsure of what terms and conditions to include.
Finally, a friendly reminder: We cannot be your personal attorney or any other type of professional advisor. Please seek the services of an attorney if you have any questions on the LOI or any other legal document. By providing the LOI Builder for you to use as a tool, Acquire does not and does not intend to form any sort of professional relationship or engagement with you.
Why Use the LOI Builder?
One of the greatest barriers to acquisition, especially for first-time buyers, is the legal process. Although LOIs aren’t usually legally binding, they can include legally binding terms such as a mutual NDA or exclusivity clause. As such, you might be apprehensive about drafting one or incurring the cost of a lawyer to draft it on your behalf.
Now, you don’t needn’t worry about either. In just a few clicks, the LOI Builder drafts the legal wording for you (in as little as five minutes). You then save hours of drafting and potentially thousands of dollars in legal fees. And since the LOI Builder integrates seamlessly with your Acquire workflow, you can Acquire and negotiate safely while leaving a clear audit trail.
Sending your offer with our LOI Builder will summarize key details for the founder, making it easier for them to know whether you’re offering a fair deal. This is huge: Clarity on both sides of the acquisition ensures smooth sailing to close. You might find better deal traction simply from using our LOI Builder than doing everything off-platform manually.
How the Acquire LOI Builder Works
The LOI Builder sits within your Acquire workflow. No switching between Word or Google Docs. Once a founder grants you access to their startup, create and send your LOI from within the startup’s listing or your requests page. It should take no longer than five minutes.
Our founder, Andrew, explains how it works in the video below. We’ve also included a description of each stage beneath the video.
Please note: To use the LOI Builder, you must be a Premium Buyer and the founder have granted you access to their startup’s private information.
1. Once you’ve been granted access to the startup, click Make Offer.
The “Make Offer” button is available from the listing or your startup requests page.
2. On the next page, click Build LOI.
Once you start building an LOI, you can leave at any time and the Builder will save your progress. You can continue building your LOI later by clicking Continue Offer from your requests page or the startup listing.
3. Enter the details of the startup you want to Acquire.
Enter the name of the startup and the seller – ensure you use the full legal names of both since they’ll both appear in the LOI. Don’t worry if you make a mistake – you can hit the back button and edit the details at any time before sending your LOI.
4. Enter the purchase price in USD.
The purchase price is the amount you’ll pay to Acquire the startup. Please only enter amounts in USD. If your offered price is significantly lower than the asking price, we recommend discussing your offer with the founder first.
5. Choose closing conditions (optional)
If the founder’s employees are going to stay on, you might want to add a condition that they sign new employment agreements with you. Otherwise, if you think they might pose a competition risk, add a non-compete condition. You can also add both conditions.
6. Add any additional terms (optional)
You can change the governing law jurisdiction from the default state of Delaware to another of your choosing. You can also add a confidentiality clause if you and the founder have yet to sign a non-disclosure agreement (NDA).
7. Enter escrow details
Your LOI should include an escrow provision to protect you and the founder from fraud. The LOI Builder will connect you with our trusted partner, Escrow.com, to safeguard your transaction. You also choose who pays the escrow fee (you, the founder, or both of you).
8. Review, sign, and send your LOI
Download your LOI and review it carefully. Once you’re happy, click Sign LOI to add your signature. You can also download a signed copy for your legal counsel before sending. Then, click Send LOI to forward your offer to the founder.
We save your progress through each stage of the LOI Builder so you can exit and return to it at any time.
Frequently Asked Questions
What is a letter of intent (LOI)?
A letter of intent (LOI) is a formal offer of acquisition and describes how much you’re offering the founder (the purchase price) and under what terms and conditions. The founder is under no obligation to accept your LOI, so consider it the start of negotiations. Once the founder accepts, however, you start the formal acquisition process, moving to due diligence and escrow.
Do I have to send an LOI before acquiring a startup?
Yes, to Acquire a startup on Acquire you must first send the founder an LOI they subsequently accept. Legally and transparently documenting each stage of the acquisition protects you, the founder, and the integrity of the Acquire platform.
Is an LOI legally binding?
An LOI is doesn’t legally require you to go through with the proposed transaction. However, it may sometimes contain legally binding terms that help both sides complete the transaction like a mutual NDA or “no-shop” clause.
The LOI Builder automatically includes a “no-shop” clause (which you can remove if you want). This prevents the founder from speaking to or negotiating with other buyers once they’ve accepted your LOI. If you’re at all doubtful of your obligations under the LOI, please consult a legal professional.
Do I need my lawyer to review the LOI?
The LOI Builder drafts the legal wording according to the choices you make and information you enter at each step. As a result, you might not need a lawyer to review the wording if you understand and are comfortable with the terms and conditions. As always, please consult with an attorney if you have any questions.
What are non-compete and non-solicitation clauses?
When you acquire a startup, some of the founder’s employees might leave and start up a similar business and try to take your customers with them. Non-compete and non-solicitation clauses, in effect, prevent this from happening for a set period after the acquisition closes.
What happens if I make a mistake when building the LOI?
As long as you catch the error before sending the LOI, you can return to the step where you made the mistake and correct it. For mistakes made after sending the LOI, you’ll need to ask the founder to reject your LOI and then rebuild another one from the beginning.
What happens after I send the LOI?
Once sent, the founder will receive a notification to review your LOI. They might accept your LOI immediately and you’ll progress to the next stage of the acquisition. Or, they might reject your LOI and negotiate alternative terms. We suggest giving the founder at least three working days before chasing them for a response on your LOI.
Does the LOI Builder save progress?
Yes. You can exit the LOI Builder at any time and it’ll save your progress. To resume building your LOI, just return to the request or startup listing to continue.
Can I still draft an LOI manually?
Yes, you can still upload your own LOI and send it to founders. To draft and send your LOI manually, click Upload it now on the first page of the LOI Builder (pictured below).
Can I replace my manual LOI with one from the Builder?
If you’ve already sent an LOI to the founder manually, you can’t send one with the LOI Builder. The only exception is if you sent the LOI manually off-platform. In which case, so long as that manual LOI is no longer valid, you can create a new one using the LOI Builder.
How many LOIs can I send?
You can only send one LOI to a founder at a time. Once the founder accepts the LOI, you can’t send any others unless it’s subsequently rejected or canceled.
How do I add a condition not included in the builder?
Our LOI Builder is designed to be quick and easy and covers around 80% of startups currently listed on Acquire. However, if you’d like to add additional terms and conditions not currently listed in the LOI Builder, you’ll need to create and upload your LOI manually.
Today’s LOI Builder is just the start. Please let us know how to make the LOI Builder better for you in this form and we’ll do our best to include your suggestions in the next version. Thank you.
Can I use the LOI Builder for acquiring startups outside of Acquire?
What is escrow and do I need it?
Escrow is a trusted third-party service that manages the transfer of acquisition funds. Rather than rely on trust, you and the founder use an escrow service that ensures you both uphold your end of the transaction, protecting you both from fraud. Our chosen escrow partner, Escrow.com, will safely handle your transaction in the following way:
- You and the founder sign an asset purchase agreement (or other purchase agreement).
- You transfer acquisition funds to Escrow.com.
- The founder will transfer you the assets described in the purchase agreement.
- You review and approve the assets.
- Escrow.com will release your funds to the founder.
Who pays the escrow fee?
You have the option to select who pays the escrow fee while building your LOI. The options are you, the founder, or both of you (a 50/50 split).
Why has the founder rejected my LOI?
The founder might reject your LOI for many reasons. Perhaps your offer was too low, the terms and conditions too restrictive, or they’ve changed their mind about selling. Usually, the rejection will come with a note from the seller explaining why they rejected your LOI (we always recommend they give a reason). If that’s missing, feel free to ask for their reasons via chat.
The content on this site is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional before entering into any M&A transaction. It is not Acquire’s intention to solicit or interfere with any established relationship you may have with any M&A professional.