A letter of intent is the document that turns interest into a deal in progress. It sets out price, structure and timetable, and it is usually described as non-binding, which is true of most of it and emphatically not true of some. Understanding which parts bind is the difference between a useful step forward and a commitment you did not realise you were making.
What an M&A LOI says
What is an loi in practice: the price and how it is calculated, what is being bought, how much is paid at closing and how much later, any earnout or seller financing, the conditions to closing, the expected timetable, and what happens to employees and to you after. It is the shape of the deal written down before anyone spends money on lawyers, and its real function is to surface disagreement early, while walking away is still cheap.
The parts that bind, exclusivity above all
Most of the loi m&a document is expressed as non-binding intention. Typically binding are confidentiality, exclusivity, and who pays their own costs. Exclusivity is the one that matters to a seller: it stops you talking to anyone else for a defined period, which is exactly what the buyer is paying for by committing to diligence. Length is negotiable and should be, because an exclusivity that runs for months with no obligation on the buyer to proceed removes your leverage at the moment you most need it.
Reading a sample LOI: M&A points to push on
Reading a sample loi is useful for shape and misleading for terms, since the negotiated items differ in every deal. The points worth pushing on as a seller are the length of exclusivity and what ends it, how precisely the price is defined and what could reduce it later, what conditions the buyer can rely on to walk away, and whether the timetable has dates rather than intentions. What each clause commits you to in your specific deal is a question for your own solicitor; what this page can tell you is which clauses to ask about.
Questions people ask about loi meaning
What is an LOI, or letter of intent to sell?
A letter of intent setting out price, structure, timetable and conditions before lawyers are engaged. Its function is to surface disagreement while walking away is still cheap.
Is the letter of intent M&A buyers send binding?
Mostly not, with important exceptions. Confidentiality, exclusivity and cost allocation typically do bind, and exclusivity is the one that matters most to a seller.
What should a seller negotiate in a draft LOI?
The length of exclusivity and what ends it, how precisely the price is defined, what conditions let the buyer walk, and whether the timetable carries dates rather than intentions.