LOI

The Letter of Intent is the point in a deal where a vague conversation becomes a specific,
written outline: price, structure, timetable, and the conditions attached to all three. Most of
an LOI is non-binding — a statement of intent, not a contract — but a handful of clauses inside it
usually are, and those few clauses matter more than everything else in the document combined.

For a founder, signing an LOI is the moment you stop talking to other buyers, which is why it
deserves the same care as a contract even though most of its text technically is not one. For a
buyer, it is the document that earns them the right to spend real money on
due diligence without the risk of being outbid mid-way through.

Getting the balance wrong — treating an LOI as a formality because "it's non-binding anyway" — is
one of the most common and most costly mistakes in a first-time sale.

An LOI typically sets out the proposed price and how it is structured (cash, rollover, an
earnout), the intended transaction structure, a target timetable through to
closing, and the major conditions the buyer expects to be satisfied —
financing, board approval, a clean result from diligence.

Almost all of that is expressed as intent, not obligation, and is understood by both sides to be
open to change once diligence turns up something new. What is different is a short list of
clauses that are usually drafted to be binding regardless of what happens to the rest of the
deal: exclusivity, confidentiality, and often a clause on who pays
costs if the deal collapses through one side's fault. These survive even if the buyer walks away
from the price entirely.

Because the LOI is where exclusivity usually begins, it is the document that marks the seller's
last real point of competitive leverage — after signing, there is (by design) no other buyer to
create pressure on price or terms.

Read every clause as if it might be the only one that is binding — because a few of them are.
The single biggest mistake first-time sellers make is treating the whole LOI as a formality
because most of it is described as non-binding. Exclusivity is not.

Exclusivity length is a real negotiation, not a technicality. The longer the exclusive period,
the longer you are locked out of talking to anyone else while this one buyer decides whether to
proceed — with no guarantee they will. Push for a period matched to how long diligence should
reasonably take, not an open-ended one.

A price in an LOI is not the price at closing. It is normal, and not necessarily bad faith,
for the number to move once due diligence surfaces something real. The
protection against an unfair repricing is a clear, narrow list of what could justify a change,
agreed while everyone is still negotiating in good faith — not left to be argued over later.

Watch for a "no-shop" that is broader than exclusivity. Some LOIs bundle in a restriction on
even discussing the business with anyone else, including people who approach you unprompted.
That is a bigger commitment than simple exclusivity and should be recognized as such rather than
signed by accident.

A break fee changes the buyer's incentives, for better or worse. A clause requiring
reimbursement of the buyer's costs if the seller walks away without cause can be reasonable, but
should never be so large that it effectively removes the seller's ability to walk away at all.

Offer / LOI is a named stage in the M&A track of GetDeal's deal room — the point right after
Handshake where the outline described above gets formalized, on a stage tracker both sides can
see rather than a document one side is guessing the status of. Moving past this stage into
Data Room is what actually opens the controlled document exchange, so the LOI's role as the gate
before real diligence begins is reflected directly in how the deal room is structured.

The Playbook lays out what unlocks at each stage and which agreement is signed when, which is
worth reading before agreeing to an exclusivity period whose length you have not thought through.