A Letter of Intent (LOI) or term sheet, which proposes some of the key deal terms in a professional manner, may not be “bankable” but could be a good start to a longer term, more serious deal and relationship. However, you ultimately need bona fide, fully executed, binding contracts (Operating Agreements/Private Placement Memoranda/Subscription Agreements), which has been blessed by your legal counsel, before you should feel comfortable that your merger and acquisition attempts were a success.
A common package of buyout terms may include any combination of cash, stock and performance-based incentives, including “earn-outs,” which are tied to future revenues, profits, or events, as opposed to just stock price.
