A letter of intent (LOI) is a usually non-binding document outlining the proposed terms of an acquisition, signed before the definitive agreement. Sometimes called a term sheet in M&A context or memorandum of understanding (MOU), it is signed before deep due diligence and establishes the headline price range, transaction structure, key conditions, and an exclusivity period during which the seller commits not to negotiate with other potential buyers. It is the document that turns a buyer's interest into a structured negotiation and the document founders most commonly misunderstand as a commitment to close.
The components of a typical LOI: headline price and structure (cash vs stock, all-cash vs earnout, fixed price vs c...