The letter of intent is the most important document most sellers underestimate. It's where the real terms of your deal get set — price, structure, timeline, and how much room the buyer gets to renegotiate later. Everything that follows is downstream of the LOI. Get it right and the rest of the deal runs on rails. Get it wrong and you'll spend the next sixty days giving ground.

This is general information, not legal advice — have your attorney review any LOI before you sign.

What an LOI is — and isn't

A letter of intent outlines the proposed terms of a transaction before the parties spend real money on diligence and legal work. Most of it is non-binding — a statement of intent, not a contract to sell. But specific clauses usually are binding: confidentiality, and exclusivity (the "no-shop"). Knowing which is which is the whole game.

What belongs in it

  • Purchase price and structure. The number, and how it's paid — cash at close, seller note, earnout, rollover equity.
  • Deal type. Asset purchase or equity/stock purchase. The difference is enormous for taxes and liability.
  • Deposit / good-faith terms, if any.
  • Due-diligence period. How long the buyer gets to inspect, and what access they receive.
  • Exclusivity (no-shop). Whether — and for how long — you agree not to talk to other buyers. Cap this tightly.
  • Confidentiality. Protecting the fact and details of the discussion.
  • Conditions to closing and a target timeline.
  • A clear binding / non-binding statement. Spell out exactly which provisions bind.

Mistakes that cost sellers

  • Vague price or structure. "Approximately $X, subject to adjustment" hands the buyer a renegotiation lever. Pin it down.
  • Unlimited exclusivity. A long no-shop with no deadline lets a buyer tie you up, then grind you down. Keep it short and tie it to milestones.
  • Binding too much, too early. Don't accidentally turn an intent letter into a sale contract.
  • Ignoring asset vs. stock. It's not a detail — it can move your after-tax proceeds materially.

A simple LOI template

A clean, plain-English skeleton to start from — adapt with your advisors:

LETTER OF INTENT Date: __________ Buyer: __________ Seller: __________ ("the Company") 1. Transaction. Buyer proposes to acquire the Company by way of [asset / stock] purchase. 2. Purchase Price. $__________ , payable as: - $______ cash at closing - $______ seller note over ___ years at ___% interest - $______ earnout based on __________ 3. Due Diligence. Buyer shall have ___ days from signing to complete due diligence. 4. Exclusivity. Seller agrees not to solicit or negotiate with other buyers for ___ days ("No-Shop Period"). 5. Confidentiality. Both parties keep the existence and terms of this letter confidential. 6. Closing. Target closing on or before __________ , subject to satisfactory diligence and definitive agreements. 7. Binding Effect. Except for Sections 4 (Exclusivity) and 5 (Confidentiality), this letter is non-binding and creates no obligation to complete the transaction. Signed: ________________ ________________

The bottom line

The LOI sets the gravity of the deal. Be precise on price and structure, keep exclusivity short and conditional, and be deliberate about what binds. The terms you concede here are the terms you'll live with.

Don't negotiate it alone

We draft and negotiate LOIs for the owners we represent — protecting your price, capping exclusivity, and structuring the payment so it works for you. It's the moment a good advisor earns their keep.