Letters of intent in Swiss business acquisitions

An LOI is useful once the parties understand the opportunity well enough to justify investing in due diligence and financing, but before every contractual detail has been settled. It should not be signed merely as proof of interest, nor delayed until it adds no structure. The seller, buyer, transaction object, principal financial information and decisive assumptions should be sufficiently clear. State the document's purpose, information basis and intended next steps so it becomes a working framework rather than a symbolic document with conflicting expectations.

• confirm basic commercial alignment before drafting
• state the information reviewed and purpose of the LOI
• reserve unverified details for diligence and agreement

Identify the status of each clause instead of relying only on a general heading. Confidentiality, exclusivity, costs, governing law and forum may be binding even when the parties do not promise to complete the acquisition. Price, structure and closing usually remain indicative until conditions and the final agreement are satisfied, but wording and conduct matter. Avoid mandatory language in a supposedly non-binding section. Have Swiss counsel review the complete document so disclaimers, signatures and clause-specific wording tell one consistent story about legal effect.

• mark the intended effect of every material provision
• list the clauses that remain binding after termination
• remove language that contradicts stated reservations

The LOI can state an amount, range or formula and should explain the financial period, earnings measure, debt, cash and working-capital assumptions. Clarify whether the proposal is a share deal or asset deal, what is included and how cash-at-closing, deferred payments, seller loans or earn-outs work. A bare number creates false certainty. Identify adjustments and matters still subject to due diligence, tax advice, financing or negotiation. The seller can then compare proposals on a common basis rather than treating different perimeters and payment risks as identical prices.

• connect price to a defined perimeter and reference accounts
• describe immediate, deferred and variable consideration
• list adjustments and assumptions still to be verified

If the seller pauses discussions with other candidates, exclusivity should have a proportionate duration, a clear start and end, and milestones that the buyer must meet. Define data-room access, management meetings, adviser contacts, question handling and the expected diligence timetable. Record financing, approvals, consents and absence of material adverse change as conditions or reservations where appropriate. Long exclusivity without documents, activity or an exit right can block the seller without bringing closing closer; unrealistic deadlines can pressure the buyer into incomplete review.

• tie exclusivity to dates, deliverables and active progress
• define review access, contacts and question procedures
• identify approvals, financing and consents still required

Create a responsibilities list for due diligence, financing, drafting, approvals and the intended closing. Update the parties promptly when material assumptions change rather than allowing an outdated LOI to guide negotiations. The purchase agreement should be drafted from verified facts and negotiated protections, not copied mechanically from the LOI. If discussions end, apply confidentiality, return or deletion, cost and exclusivity provisions that survive. A good LOI shortens later debate by identifying the real issues; it does not eliminate the need for evidence and detailed contracts.

• assign owners and deadlines for every next workstream
• record changes to assumptions and proposed terms
• carry only verified and agreed concepts into the contract

It depends on the wording, structure, circumstances and conduct of the parties. An LOI can contain both binding clauses, such as confidentiality or exclusivity, and non-binding commercial intentions. Calling the document non-binding may not cure contradictory mandatory language. The parties should specify the intended effect of each section and obtain Swiss legal advice before signing, particularly where price, duty to negotiate, costs or termination consequences could be interpreted differently.

Usually it should state an indicative amount, range or formula if the parties have enough information, together with the transaction perimeter and assumptions. Explain treatment of debt, cash, working capital and deferred or variable payments. The price can remain subject to due diligence, financing and final agreement. A number without those qualifications is difficult to compare and may create a dispute when the parties later discover they assumed different balance-sheet or asset positions.

There is no standard period. It should reflect the scope of due diligence, financing, adviser availability, document readiness and required approvals. The period is more defensible when linked to milestones and active progress, with consequences if either side delays. The seller needs enough certainty to justify pausing other discussions, while the buyer needs enough time for a responsible review. Extensions should be agreed deliberately rather than becoming automatic because the original timetable was unrealistic.

Often yes for the non-binding acquisition itself, but binding confidentiality, exclusivity, cost, law or dispute clauses may continue. The parties must also consider pre-contractual duties and avoid misleading conduct. The LOI should explain termination rights and surviving obligations. If a material assumption changes, communicate it promptly and document the decision. Legal advice is appropriate before withdrawing where the wording or negotiation history could suggest a stronger commitment than intended.

• SECO: Due diligence
• SECO: Transferring your company successfully
• Fedlex: Swiss Code of Obligations