Signing a Letter of Intent feels like the moment the deal becomes real.
After months (and sometimes years) of preparing for a sale, finally receiving an LOI can feel like the finish line is in sight.
But in many deals, the LOI is where the process becomes more intense.
What follows is often a deeper level of diligence, negotiation, scrutiny, and pressure.
In this week’s newsletter, we’ll break down what sellers should expect before and after signing an LOI.
We’ll cover:
- 3 insights on how the LOI impacts your outcome
- 2 frameworks to help you evaluate it properly
- 1 action step to protect your position
3 Insights About the LOI
1. The LOI sets the tone for the entire deal
The LOI is more than a summary of terms. It becomes the reference point for everything that follows: due diligence, legal documentation, and final negotiations.
If terms are clearly defined and aligned upfront, the process tends to move efficiently. If they’re vague, incomplete, or one-sided, those issues may resurface later, often during diligence or in the final purchase agreement.
2. Exclusivity shifts leverage almost immediately
Most LOIs include an exclusivity (or “no-shop”) clause. Once signed, you’re typically off the market for 30 to 90 days or longer. During that time, the buyer has the sole opportunity to complete diligence and move toward closing.
That shift matters. Before signing, you may have multiple interested buyers. After signing, you’re committed to one. If terms weren’t fully negotiated upfront, or if the buyer slows the process, your leverage is reduced.
3. Vague language in an LOI almost always benefits the buyer later
Not everyone interprets the LOI the same way. During diligence and final negotiations, vague terms often become areas where the buyer pushes for more favorable treatment.
Ambiguity creates flexibility, and flexibility usually benefits the party with more leverage during diligence. This is especially important once exclusivity begins. At that point, the buyer has more time, more information, and often more negotiating power.
2 Frameworks to Evaluate an LOI
Binding vs Non-Binding Terms
One of the most misunderstood aspects of an LOI is what actually carries legal weight. Most of the LOI is non-binding. This includes both price and structure.
However, certain provisions are typically binding: Exclusivity, confidentiality, and access to information.
This creates an imbalance. You’re committing to negotiate exclusively with one buyer, while key economic terms may still evolve. Understanding this highlights where your real risk lies, and where you need to be precise before signing.
The LOI as a Blueprint
A helpful way to think about the LOI is as a blueprint for the deal. It outlines:
- Purchase price and structure
- Working capital expectations
- Timeline and diligence scope
- Key conditions to closing
These elements anchor the process. During diligence and legal negotiations, both sides will repeatedly refer back to what was agreed upon in the LOI. If something is unclear or loosely defined, it becomes a point of interpretation and negotiation.
List of Our Completed Transactions
1 Action Item This Week
Create a pre-LOI checklist before signing anything
Outline the major terms that matter most, price structure, working capital, exclusivity, timelines, and transition expectations, so there’s alignment before negotiations move deeper into the process.
The clearer these items are upfront, the fewer surprises you’ll face later.