Deal Terms
Letter of Intent
A non-binding document outlining the preliminary terms of a deal, commonly used in M&A and some venture transactions.
A Letter of Intent (LOI) is a document expressing a party's intention to enter into a transaction, outlining key terms and conditions. In M&A, LOIs precede definitive agreements and typically include exclusivity periods during which the target company cannot shop the deal. In venture, term sheets serve a similar function. LOIs are generally non-binding except for specific provisions like confidentiality and exclusivity.
In Practice
An acquirer sends an LOI offering $100M to buy a startup, with a 45-day exclusivity period for due diligence and definitive agreement negotiation. The LOI's financial terms are non-binding.
Why It Matters
LOIs set the framework for deal negotiations and create moral commitments even when legally non-binding. Understanding which provisions are binding (exclusivity, confidentiality) is critical.
Related Concepts
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