The letter of intent is the most consequential document most buyers treat as a formality. It is largely non-binding on price, and yet it decides how the rest of the transaction goes.
What belongs in it
- Price, and how it is paid — cash at closing, seller financing, earn-out, escrow.
- Asset or stock, and who carries which liabilities.
- What is included: working capital target, inventory, equipment, real estate or lease.
- The seller's role after closing, and for how long.
- Diligence period, exclusivity, and the expected closing date.
- Conditions — financing, landlord consent, licence transfer, key customer or employee retention.
Why vagueness costs money
Every business term left out of the LOI gets negotiated later, in the purchase agreement, with lawyers on the clock and both sides emotionally invested. Terms that surface late feel like retrading even when nobody intended it, and that is where otherwise sound deals collapse.
Speed is a term too
On a competitive listing, the ability to produce a clear, well-structured LOI within days is itself part of the offer. That is a function of having an experienced M&A attorney identified before you need one — not of how badly you want the business.