Deal Terms
Last updated
Quick Answer
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.
VC Beast Take
LOIs in venture are often overlooked compared to term sheets, but they're critical in M&A exits where most venture returns actually materialize. Smart founders negotiate LOI terms carefully because while non-binding, they set psychological anchors for final deal terms. The best M&A attorneys can craft LOIs that provide meaningful protection while maintaining deal momentum — a skill that often determines exit success.
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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.
Understanding Letter of Intent is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Letter of Intent falls under the deal-terms category in venture capital. This area covers concepts related to the financial and legal terms that define investment agreements.
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