Let’s Make This a Thing – LOIs

Written by James Sanders

You figured out what you want and how much its worth, now what?  Do you still fear the commitment?  Well, a letter of intent is a good next step in the acquisition/sale process which can make life a bit simpler when the purchase agreement gets drafted and the closing occurs.  A letter of intent (“LOI”) essentially lays out that you are serious about the transaction, but aren’t quite ready to fully commit to the deal.

An LOI is usually drafted by the buyer’s counsel and addressed to the seller.  LOIs are a helpful part of the transaction process because it can:

• Settle on key deal points early in the process;
• Clarify what needs to be investigated and minimize any misunderstandings; and
• Provide for deal process stability and commitment, without the burden of a full obligation of a purchase agreement.

Lastly, an LOI is generally non-binding, except that it may include some standard legally binding provisions relating to exclusivity of negotiations, confidentiality, governing law and expenses.