Process Letter

A process letter is a letter from the seller's advisor to potential buyers. It explains the structure of the auction process, the deadlines, and the requirements for offers. This ensures that all parties know how and by when they must submit their bids. Two letters are customary, one per phase.

The first accompanies delivery of the information memorandum and sets the deadline for an indicative offer, the information it must contain, in particular price range, valuation assumptions, financing structure, approval requirements and timetable, and the form of submission. The second goes to second-phase bidders and governs access to the data room, the conduct of management presentations, the question and answer process and the requirements for the binding offer, which regularly must include a marked-up draft agreement, evidence of financing and confirmation of internal approvals. Its purpose is twofold: comparability of offers and control over the process. The letter therefore regularly includes an express reservation that the seller is not obliged to accept the highest or indeed any offer, may change or abandon the process at any time, and that no claims can be derived from the letter.

For bidders, close attention to the requirements matters, because formal deviations can mean exclusion from the next phase. The letter typically covers the deadline and format for submitting an offer, the required information on price, financing, conditions and timetable, and the contacts for questions. In the second round it additionally sets out the scope of further diligence, access to the data room, dates for management meetings and the expectation of a mark-up of the draft purchase agreement.