Letter of intent
A letter of intent (LOI) is a non-binding term sheet setting out price, structure, and key terms, which typically grants exclusivity.
In a sale
Is a letter of intent binding?
A letter of intent is non-binding, but it usually grants the buyer exclusivity, and a term it leaves out is hard to win back once exclusivity begins. It is where price, structure, and the key terms are first written down. Comparing letters of intent on take-home and certainty, not on the headline, is how founders choose among them.
Where it comes up
Read it in context
In the articles
- Where founders leave money on the tableMost of what founders lose in a sale is lost in their own decisions, and each one has a fix.
- Same business, two outcomesTwo identical businesses, one prepared and one not, sell for very different prices.
- An add-back is an argumentAdjusted EBITDA is built, not declared, and the buyer's accountants will rebuild it.
- What an LOI is really sayingThe headline is one term of nine. Here are the other eight.
- When a buyer calls firstAn inbound offer is information, not a decision.
- Diligence yourself firstEvery business has issues. The question is who finds them.
- Strategic, platform, add-on, sponsor: who buys whatDifferent buyers pay for different things. The process should include several.
- Structure is priceTwo offers with the same headline can differ by millions in what you keep.
In The FNDRS Playbook
See the terms with your own numbers
The Go-To-Market Analysis (GTMA) builds the file a buyer would build on your business, before a buyer does.