Letter of intent (LOI)

The LOI is where a deal becomes real. It converts a conversation into a written framework, gives the buyer enough certainty to spend money on diligence, and gives the seller enough comfort to open the business up. It is also the last easy moment to change a term — after the LOI, moving price or structure is renegotiation.

The parts that usually do bind

• Exclusivity, or "no-shop" — the seller agrees not to negotiate with others for a set period
• Confidentiality, often carried forward from the NDA
• Who pays their own costs
• How and when either side may walk away
• Sometimes a deposit, and whether it is refundable

Why the non-binding parts still matter

A term left vague in the LOI becomes a fight in the definitive agreement, when both sides have spent money and momentum makes walking away expensive. Working capital treatment, the scope and length of a seller non-compete, and what happens to employees are the three most commonly deferred — and the three most likely to stall a deal weeks later.