Letter of Intent

A letter of intent (LOI) signals that two parties have moved beyond exploratory conversation and are prepared to invest time and resources in completing a deal. Like a term sheet, an LOI is typically non-binding on the core transaction, but it usually includes binding provisions around exclusivity — preventing the seller from negotiating with other buyers for a defined period — and confidentiality.

Families encounter LOIs most often in the context of acquiring a business, purchasing a significant piece of real estate, or entering a structured direct investment. An LOI in an acquisition context will generally outline the proposed purchase price or pricing methodology, the structure of the deal (asset purchase versus equity purchase), key conditions to closing, and the exclusivity window. Qualified attorneys and CPAs should review any LOI before it is signed, because even "non-binding" language can have practical and legal consequences.

Imagine a three-generation family considering the purchase of a regional distribution company. They submit an LOI offering an illustrative purchase price range, proposing a 45-day exclusivity period, and specifying that the transaction is subject to satisfactory due diligence. The seller, reassured that the family is serious, agrees to stop marketing the business while both sides move into detailed review. This exclusivity is often the most valuable element of the LOI for a buyer.

A frequent confusion is conflating an LOI with a definitive purchase agreement. The LOI does not close a deal — it creates the runway to negotiate and draft the documents that do. Families active in acquiring assets as part of their broader investment management function treat LOIs as a serious commitment of attention and cost, even when legal obligation remains limited.