What a letter of intent is, and why it matters more than the price on it.
The LOI is the moment leverage changes hands. It sets price, structure and an exclusivity window, and almost everything in it becomes very hard to renegotiate afterwards.
Letter of intent, defined.
A letter of intent is a mostly non-binding document that lays out the agreed price, the structure of the deal, what is included, and a timeline to closing.
Two parts of it usually are binding: exclusivity, which stops you from talking to other buyers, and confidentiality. Once you sign, your competitive process is over.
This is where owners gain or lose ground.
Before the LOI you have several interested buyers and all the leverage. After it you have one buyer and a clock. Anything you did not negotiate now gets negotiated from a weaker position.
The headline price is also not the money. Escrow, holdbacks, earn-outs, working capital targets, seller notes and the non-compete all decide what you actually take home and when.
Our job at this step.
Three mistakes we see again and again.
Reading only the price
A lower headline with clean terms frequently pays more than a higher one loaded with earn-outs.
Granting long exclusivity
Ninety days of exclusivity with no milestones invites a retrade close to closing.
Signing before your advisors read it
The LOI shapes the purchase agreement. Fixing it later costs far more than reviewing it now.