Business, Legal & Accounting Glossary
A binding offer is an offer made by a bidder to acquire a target company (or seller) following the completion of the due diligence phase of a sale process. If the seller accepts the bidder’s terms, this offer becomes a formal contract between the bidder and the seller. In contrast to an indicative offer or an indication of interest, the bidder is legally bound to comply with the terms and conditions of a binding offer if it is accepted.
Following the receipt and review of non-binding indications of interest or letters of intent (indicative offers) during a sale process, selected bidders will be invited to conduct due diligence on the target company. Following the completion of the due diligence process, the purchase price and other terms outlined in the indicative offers will be confirmed or revised, and bidders will submit their respective binding offers to the seller.
If, for example, the bidder discovers negative, previously undisclosed information during the due diligence process, a binding offer may differ significantly from the non-binding indicative offer previously submitted by the same bidder. Once a binding offer is accepted by the seller, the bidder is bound by its terms and conditions.
Expression of Interest
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This glossary post was last updated: 26th January, 2022 | 18 Views.