Letter of Intent
Also known as: LOI, Term Sheet, Indication of Interest
A letter of intent (LOI) is a mostly non-binding document that sets out the key terms of a proposed deal, signaling serious intent and framing the diligence to follow.
A letter of intent, or LOI, is the document that moves a conversation toward a real transaction. It lays out the proposed price, structure, and major terms, and signals that the buyer is serious enough to commit time and money to diligence.
Binding and non-binding parts
Most of an LOI is non-binding, since the deal still depends on diligence and a definitive agreement. But certain provisions, such as exclusivity (a no-shop period) and confidentiality, are usually binding and take effect immediately.
Why it sets the tone
The LOI frames everything that follows. The price it names is the anchor a buyer will try to hold or chip away from during quality of earnings work, so sellers benefit from negotiating it carefully and entering diligence well prepared.