Non-Binding Indicative Offers: an introduction
Non-Binding Indicative Offers (NBIOs), used interchangeably in industry with Term Sheets and Heads of Agreement, are invaluable in that they can serve as a point of orientation during negotiations. Through an adeptly crafted NBIO it is possible to keep everyone involved, focused and on target.
What is an NBIO?
These nonbinding agreements can be thought of as a preliminary proposal which detail the basic terms and conditions of a deal. It is different from a legally binding agreement, so it is often misunderstood by buyers and sellers.
A well-crafted NBIO consists of more than the price, also including key terms and any major considerations, such as employment agreements, consulting and more. However, there can be components of these agreements which are binding. Common examples of these are confidentiality and exclusivity clauses, which serve to protect both the buyer and vendor.
The Importance of Customisation
The goal of any negotiation should be to achieve a win-win for everyone involved. To achieve this, it is helpful to avoid lawyers, accountants and other advisors who overutilise boilerplate documents, use adversarial tactics or adopt extreme negotiation positions.
Putting it in Writing
Once a verbal agreement has been reached on the important variables of price and terms, it is critical to put that agreement in writing. Through this the process can move on to the next stage and a more formalised letter of intent can be created.
NBIOs are an extremely useful time-saving tool. They orient the thinking of all parties involved in the process and help cultivate a clearer understanding of what the final agreement will look like. This allows both parties to avoid misunderstandings and last-minute surprises, which often sabotage deals.
Copyright: Business Brokerage Press, Inc.
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