Templates for Non-Binding Offers across M&A
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- Apr 18
- 6 min read
M&A Non-Binding Offer Template
Templates for Non-Binding Offers across M&A
A Non-Binding Offer (NBO), often referred to as a Letter of Intent (LOI) or Indicative Offer, serves as a critical bridge between initial interest and formal due diligence. While "non-binding" regarding the transaction itself, it typically contains legally binding clauses regarding confidentiality and exclusivity.
Below is a standard, attorney-vetted framework for an M&A Non-Binding Offer, organized by the essential legal and commercial sections.
1. The Structure of a Non-Binding Offer
Section | Purpose | Legal Status |
Purchase Price | Outline the valuation and payment structure (Cash vs. Equity). | Non-Binding |
Conditions Precedent | Lists what must happen before a final deal (e.g., Board approval). | Non-Binding |
Exclusivity (No-Shop) | Prevents the seller from talking to other buyers for a set period. | Binding |
Confidentiality | Protects the data shared during the process. | Binding |
Governing Law | Determines which jurisdiction’s laws apply to the document. | Binding |
2. Template Framework (Standard Middle-Market)
Note: This template assumes a "Share Purchase" structure. If acquiring assets, the language should be adjusted to "Purchased Assets."
I. Transaction Overview
Proposed Transaction: [Buyer Name] proposes to acquire 100% of the issued share capital of [Target Company].
Purchase Price: An indicative valuation of [Currency & Amount], calculated on a "Cash-Free, Debt-Free" basis, assuming a Normalised Level of Working Capital.
Payment Terms: [e.g., 70% at Closing, 30% held in Escrow or paid as an Earn-out over 24 months].
II. Assumptions & Diligence
Key Assumptions: This offer is based on the [Year] Audited Financials showing an EBITDA of [Amount].
Due Diligence: The offer is subject to a [e.g., 30 to 60-day] period of financial, legal, tax, and operational due diligence.
III. Binding Provisions (The "Legal Lock")
Exclusivity: The Seller agrees that for a period of [e.g., 45 days] from the date of this letter, it will not solicit, initiate, or encourage any negotiations with any third party regarding a sale.
Expenses: Each party shall bear its own legal and professional costs incurred in connection with this transaction, regardless of whether a definitive agreement is reached.
Governing Law: This letter and any dispute arising out of it shall be governed by the laws of [Jurisdiction, e.g., Singapore/Hong Kong/England].
3. Key Risk Factors to Vet
When reviewing these templates with counsel, pay specific attention to:
The "Binding" Leak: Ensure the letter explicitly states: "Except for the sections titled Exclusivity, Confidentiality, and Governing Law, this letter represents a non-binding expression of intent and does not create a legal obligation to close the transaction."
Working Capital Adjustments: Clearly define how "Net Debt" and "Working Capital" will be calculated to avoid price chipping later in the process.
Break Fees: Determine if a "Break Fee" (payable if the seller walks away) is appropriate for the deal size.
Important Disclaimer
This information is for educational purposes and does not constitute legal advice. M&A transactions are subject to specific jurisdictional nuances (e.g., Stamp Duty in Singapore vs. Capital Gains in Malaysia). You should have your final draft reviewed by qualified legal counsel in the relevant jurisdiction.
This template is designed for middle-market M&A transactions. It is structured to ensure that while the commercial terms remain non-binding, the legal protections—such as exclusivity and confidentiality—are strictly enforceable.
Non-Binding Letter of Intent (LOI) / Indicative Offer
Date: [Date]
To: The Board of Directors / Shareholders of [Target Company Name]
From: [Purchaser Entity Name]
1. The Proposed Transaction
[Purchaser Name] (the "Purchaser") proposes to acquire 100% of the issued and outstanding share capital of [Target Company Name] (the "Company"), including all subsidiaries and intellectual property, free from all encumbrances.
2. Purchase Price and Structure
Indicative Valuation: The proposed purchase price is [Amount and Currency] (the "Purchase Price").
Basis of Valuation: This valuation is based on a [e.g., 6.0x] multiple of the Company’s FY2025 Adjusted EBITDA of [Amount].
Payment Terms:
[Amount] payable in cash at Closing.
[Amount] to be held in an Escrow account for [Number] months to secure indemnity obligations.
[Amount] as a performance-based Earn-out, contingent upon [Specific Metric].
Debt-Free/Cash-Free: The Purchase Price assumes the Company will be delivered on a "debt-free, cash-free" basis with a normalized level of working capital at Closing.
3. Conditions Precedent
The obligation of the Purchaser to enter into a Definitive Agreement is subject to the satisfaction of the following:
Satisfactory completion of financial, legal, tax, and operational due diligence.
Final approval by the Purchaser’s Board of Directors.
Execution of mutually agreeable definitive transaction documents.
Obtaining all necessary third-party and regulatory consents.
4. Conduct of Business
From the date of acceptance until the Closing (or termination of negotiations), the Company shall be operated in the ordinary course of business consistent with past practice. No material assets shall be disposed of, and no significant contracts entered into, without the Purchaser’s prior written consent.
5. Exclusivity (Binding)
In consideration of the costs incurred by the Purchaser in conducting due diligence, the Seller agrees that for a period of [e.g., 45] days (the "Exclusivity Period"), it will not, directly or indirectly, solicit, initiate, or engage in discussions with any third party regarding the sale of the Company.
6. Confidentiality (Binding)
The parties agree that the existence and terms of this Letter, and all information exchanged during due diligence, shall be kept strictly confidential in accordance with the Non-Disclosure Agreement (NDA) dated [Date].
7. Non-Binding Nature
Except for the provisions set forth in Sections 5 (Exclusivity), 6 (Confidentiality), 8 (Expenses), and 9 (Governing Law), this Letter is intended solely as a non-binding expression of intent. It does not create a legally binding obligation on either party to consummate the transaction.
8. Expenses (Binding)
Each party shall bear its own legal, accounting, and professional advisory fees and expenses incurred in connection with this transaction.
9. Governing Law (Binding)
This Letter and all related disputes shall be governed by and construed in accordance with the laws of [Jurisdiction, e.g., Singapore].
For and on behalf of the Purchaser:
[Name]
[Title]
Accepted and Agreed by the Seller:
[Name]
[Title]
Critical Drafting Notes
The "Binding" Disclaimer: Ensure Section 7 is prominently displayed. Without this, a court may interpret the LOI as a "contract to bargain in good faith."
Leakage and Adjustments: If you are acquiring a company in a jurisdiction like Singapore or Malaysia, define whether the "Locked Box" or "Completion Accounts" mechanism will be used for price adjustments.
Specific Jurisdictions: For cross-border deals in Southeast Asia, ensure the governing law aligns with the location of the assets or a neutral hub like the SIAC (Singapore International Arbitration Centre).
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Templates for Non-Binding Offers across M&A
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