How to Write an Offer Letter to Buy a Business in Dubai

Buying a business in Dubai is an exciting yet complex process that requires careful planning and execution. One of the most crucial steps in this journey is drafting an effective offer letter. Over the years, we have helped numerous entrepreneurs and investors successfully buy businesses in Dubai by creating compelling and professional offer letters.

A well-written offer letter not only demonstrates your seriousness as a buyer but also sets the stage for smooth negotiations. In this guide, we will share our experience in business acquisitions, explaining what makes an offer letter effective, the different types of offers, and key legal considerations to keep in mind.

What is a Business Offer Letter?

A business offer letter is a formal document you give to the seller to show your interest in taking over their business. It includes important details like the price you are offering, payment terms, and conditions.

While it is not a legally binding contract, a good offer letter helps build trust and sets the stage for negotiations. In Dubai, where many international investors do business, a professional offer letter is very important.

Why is an Offer Letter Important?

Many business buyers underestimate the importance of an offer letter, thinking that negotiations happen verbally or through legal agreements later. However, based on our extensive experience, we have found that a strong offer letter can:

• Demonstrate Seriousness: Sellers are more likely to engage with buyers who present well-prepared offers.

• Set Clear Expectations: It minimizes misunderstandings by defining price, terms, and conditions early on.

• Facilitate Negotiations: It provides a reference point for discussions on pricing, payments, and other conditions.

• Build Trust: A professional approach shows respect for the seller and their business, leading to smoother transactions.

Owners who are selling businesses that are already well-established in Dubai’s business market appreciate buyers who take the time to present a structured offer, as it signals professionalism and a well-thought-out investment strategy.

Types of Offers to Purchase a Business & When to Use Them

When acquiring a business in Dubai, you can structure your offer in several ways. Each type has its advantages depending on the situation, financial capacity, and the seller's expectations.

1. Cash Offer

Best for: Buyers who have money ready and want a quick deal.

This is a straightforward offer where the entire purchase price is paid upfront. Sellers often prefer cash offers as they ensure a fast and smooth transaction. If you have enough financial resources and want to secure a deal quickly, a cash offer can give you an edge over other buyers.

2. Installment Offer

Best for: Buyers who prefer to pay over time.

Here, the payment is divided into multiple installments, often with an initial down payment and scheduled payments over months or years. This is useful when investing in a business that requires working capital to operate after purchase.

3. Earn-Out Offer

Best for: Buyers who want to link part of the payment to the business’s future performance.
A portion of the purchase price is contingent on the business achieving certain financial targets post-sale. This approach works well when acquiring a business where the current owner’s involvement or expertise contributes to its success.

4. Asset Purchase Offer

Best for: Buyers who only want specific assets instead of the whole business.

This approach allows buyers to purchase equipment, intellectual property, or real estate while avoiding liabilities associated with the business. It is commonly used when acquiring distressed businesses.

5. Share Purchase Offer

Best for: Buyers who want full ownership of an existing company.

Instead of buying just assets, the buyer acquires shares in the company, gaining control over existing contracts, employees, and liabilities. This is often used in corporate acquisitions and when continuity of operations is important.

Choosing the right type of offer depends on your financial situation, risk appetite, and the seller’s expectations.

Key Elements of an Offer Letter 

A well-structured offer letter should include the following:

• Introduction: Introduce yourself and express your interest in the business. This sets a positive tone.

• Purchase Price: Clearly state the amount you are offering to avoid confusion.

• Payment Terms: Specify whether the payment is in cash, installments, or an earn-out structure.

• Due Diligence: Mention that you will conduct a detailed review of the business’s financials and operations before finalizing the deal.

• Contingencies: List conditions that must be met, such as financing approval or lease transfers.

• Timeline: Define the expected timeline for due diligence, contract signing, and closing.

• Confidentiality Clause: Reassure the seller that their business information will remain private.

• Closing Statement: Express enthusiasm about the acquisition and invite the seller to discuss further.

Step-by-Step Guide to Writing an Effective Offer Letter

Writing an effective offer letter requires careful research, structured writing, and a professional tone. Here’s how you can do it:

1. Research the Business

Before making an offer, conduct thorough research on the business you intend to buy. This helps you make an informed decision and strengthens your position in negotiations. Here’s how to do it:

• Analyze Financial Statements: Request the business’s profit and loss statements, balance sheets, and tax records for at least the past three years. Look for revenue trends, profitability, and potential financial risks.

• Understand the Market: Research the industry’s current state, customer demand, competition, and market growth.

• Evaluate Business Operations: Understand how the business runs. Who are the key employees? What are the supplier relationships? Is there a strong customer base?

• Review Legal and Regulatory Compliance: Ensure the business has the necessary licenses, permits, and legal standing to operate in Dubai.

• Assess the Business’s Reputation: Check online reviews, social media presence, and customer feedback.

Why this is important: A well-researched offer increases your credibility and reduces the risk of acquiring a struggling business.

2. Draft a Clear Introduction

The first paragraph of your letter should be professional and engaging. It should:

• Introduce Yourself: State who you are and why you are interested in purchasing the business.

• Express Your Intent: Make it clear that you are serious about acquiring the business.

• Build a Connection: If possible, acknowledge something positive about the business, such as its reputation or customer base.

For example if you’re interested in buying a gym in Dubai, you’d write the introduction paragraph like:

"My name is [Your Name], and I am an entrepreneur with extensive experience in the fitness industry. I am highly interested in acquiring [Gym Name] as I believe it aligns perfectly with my business vision. Your gym has built a strong community presence, and I see great potential in expanding its services."

3. State Your Offer Clearly

Be direct about the purchase price and payment structure. Sellers appreciate clarity and professionalism.

• Mention the Offered Amount: Clearly state how much you are willing to pay.

• Specify Payment Structure: Will you pay in full upfront or in installments? If installments, outline the schedule.

• Explain the Basis of Your Offer: You may include factors like the gym’s financial performance, market value, or necessary upgrades.

Example:

"I am prepared to offer AED 2,500,000 for the acquisition of [Gym Name], subject to due diligence. This payment will be made in two installments: an initial deposit of AED 1,500,000 and the remaining balance after successful transfer of ownership."

4. Include Contingencies

Contingencies protect you from risks and ensure that the business meets your expectations before finalizing the purchase. Common contingencies include:

• Due Diligence: The deal is subject to verifying financial statements, lease agreements, and liabilities.

• Lease Transfer: If the business operates in a rented space, confirm that the lease can be transferred to your name.

• Licensing & Permits: Ensure that all business licenses and government approvals are valid and transferrable.

• Employee Retention: If key staff members are important to business operations, include a clause ensuring they remain employed for a specific period.

Example:

"This offer is contingent upon a successful review of the financial records, lease transfer approval, and confirmation that existing gym memberships will remain valid under new ownership."

5. Define the Timeline

Specify how long you need for due diligence and when you expect to close the deal. A typical timeline includes:

• Due Diligence Period: Usually 30 to 60 days to review financials and legal documents.

• Contract Finalization: An additional 15 to 30 days for final agreements and approvals.

• Ownership Transfer: A clear date for when the business will officially be handed over.

Example:

"I propose a due diligence period of 45 days, followed by an additional 15 days for finalizing the sales agreement and transfer of ownership. We aim to complete the acquisition within 60 days from the date of acceptance."

6. Add a Confidentiality Clause

Protect sensitive business information by assuring the seller that details of the offer and any documents reviewed will remain confidential.

Example:

"All information shared during this negotiation will be kept strictly confidential and will not be disclosed to third parties."

7. Close with a Strong Ending

End the letter by:

• Reaffirming your enthusiasm about the acquisition.

• Inviting the seller to discuss further.

• Providing your contact details.

Example:

"I am excited about the opportunity to take over [Gym Name] and continue its growth. I would love to discuss this further at your convenience. Please feel free to reach me at [Your Email] or [Your Phone Number]."

Common Mistakes & How to Avoid Them

Several factors need to be considered before acquiring a business; otherwise, mistakes may arise. The same applies when making an offer to invest in a business. Certain mistakes can weaken your position, lead to unnecessary risks, or even result in a rejected offer. Here are some common mistakes and how to avoid them:

1. Offering Without Proper Research

Mistake: Some buyers rush into an offer without conducting thorough due diligence on the business’s financial health, market position, and legal status. This can result in purchasing a business with hidden liabilities or unrealistic profit expectations.

What to Do Instead:

• Analyze at least three years of financial records, including tax returns, profit and loss statements, and debts.

• Research market conditions and competition to ensure the business has future growth potential.

• Verify any existing liabilities, contracts, and obligations before submitting an offer.

2. Making an Unrealistic Offer

Mistake: Offering too low may insult the seller, while offering too high without justification could result in overpaying.

What to Do Instead:

• Conduct a valuation using methods such as asset-based valuation, earnings multiples, or comparable business sales.

• Justify your offer with financial analysis and industry standards.

• Consider negotiating payment terms instead of drastically lowering the price.

3. Ignoring Contingencies

Mistake: Some buyers fail to include key contingencies in their offer, leaving them exposed to financial and operational risks.

What to Do Instead:

• Always include contingencies such as due diligence review, lease transfer approval, verification of licenses and permits, and financial performance assessment.

• Ensure that these contingencies allow you to back out if necessary without legal consequences.

4. Neglecting Legal and Regulatory Compliance

Mistake: Assuming that the business has all necessary permits and licenses without verifying them can lead to compliance issues later.

What to Do Instead:

• Work with a legal professional to review licenses, business registrations, tax records, and employment contracts.

• Verify compliance with Dubai Economic Department (DED) regulations if securing a business in Dubai.

5. Failing to Clarify Payment Terms

Mistake: Some buyers assume a single upfront payment is the only option, potentially straining their finances or losing negotiation leverage.

What to Do Instead:

• Propose a structured payment plan that balances both parties’ needs.

• If applicable, explore financing options, seller financing, or earn-out agreements where the final price depends on business performance.

6. Overlooking Employee and Customer Retention

Mistake: Assuming that employees and customers will automatically stay after the acquisition is risky. Losing key staff or customers can negatively impact business operations.

What to Do Instead:

• Include retention agreements for key employees to ensure smooth business continuity.

• Communicate with existing customers to maintain trust and loyalty after the acquisition.

7. Skipping Legal Review Before Submission

Mistake: Many buyers submit an offer letter without having a lawyer review it, leading to vague terms or legal loopholes that could create problems later.

What to Do Instead:

• Have a business lawyer review the offer letter before submission to ensure clarity, legal compliance, and proper protections.

• Make sure the letter is legally binding only after due diligence is complete.

Legal Considerations Before Submission

Before submitting your offer letter, you must ensure that all legal and contractual elements are in place. Here are key legal considerations:

1. Business Licenses and Permits

• Verify that the business has all required trade licenses and approvals from relevant authorities (Dubai Economic Department, municipality, health department, etc.).

• Confirm whether any special permits (e.g., food safety, health and safety, or environmental permits) are needed.

2. Ownership and Structure Verification

• Ensure the business structure aligns with UAE laws, whether it is a sole proprietorship, LLC, or a free zone company.

• Verify that the seller has full ownership rights and legal authority to sell.

3. Existing Contracts & Liabilities

• Review rental agreements, supplier contracts, and any pending legal disputes.

• Identify outstanding debts, employee salary commitments, and VAT liabilities.

4. Tax Obligations

• Confirm that VAT filings and tax payments are up to date.

• Check if there are any pending tax audits or financial penalties.

5. Lease and Property Agreements

• If the business operates from a rented location, confirm whether the lease can be transferred to you.

• Negotiate favorable lease renewal terms with the landlord before finalizing the deal.

6. Confidentiality and Non-Compete Clauses

• Ensure the seller agrees to a non-compete clause preventing them from opening a similar business nearby.

• Include confidentiality agreements to protect sensitive business information.

7. Final Legal Review by a Lawyer

• Before submitting the offer, have a lawyer review the document to ensure legal protections, contingency clauses, and clarity in terms.

Offer Letter Templates

Buying a business is a complex process that requires careful planning, research, and legal considerations. By avoiding common mistakes and conducting a thorough legal review, you increase the chances of making a successful and risk-free purchase. A well-structured offer letter template not only demonstrates professionalism but also strengthens your negotiation power.

If you’re acquiring a business in Dubai, always ensure compliance with local regulations, seek professional legal assistance, and negotiate wisely to secure a deal that benefits both parties.