Due diligence is a process initiated when sufficient interest on the part of a potential buyer has been communicated to the seller which signals a serious intent to proceed with an acquisition. The process is preceded by a "Letter-of-Intent" (LOI). An LOI is a document prepared by the potential buyer and then agreed upon by both parties. It outlines both binding and non-binding terms for engaging in discussions and the sharing of detailed information about the business being considered for acquisition. A "Letter of Intent" (LOI) represents a serious commitment by both buyer and seller to work cooperatively in understanding and verifying all aspects of the business prior completing the sale. A fundamental objective of due diligence is to arrive at a fair market value for the business agreeable to both parties.
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