Definition - What does Comfort Letter mean?
A comfort letter is a document issued by an independent auditor in a preliminary prospectus stating that while a full audit has not been conducted, an audit of just the target company's financial statements did not reveal any adverse change in operations or financial results.
Divestopedia explains Comfort Letter
A comfort letter is requested from the auditors of both parties during a merger if shareholders of the target company are receiving the acquirer's shares. The prospectus in a merger transaction includes combined pro forma financial data to show the financial status, had the transaction occurred. Separate financial statements of both the target and acquirer are, therefore, needed to show normal financial activity.
A comfort letter provides assurance that the results of an audited financial statement would be no different from the preliminary prospectus had a full audit been performed.
When Selling Your Business, What Sale Process Is Best?
Join thousands of others with our weekly newsletter