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Letter of Intent (LOI) in M&A

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Quick Answer

A letter of intent fixes price, structure and the walk-away rules before either side spends serious diligence money, and it is mostly non-binding.1

What it is

Goodwin's framework for a competitive LOI has six elements: economics, split into cash at close, escrow, holdbacks, earnout and rollover; structure and financing, with confirmation of sources; closing conditions; post-closing strategy; risk allocation, covering insurance, caps and baskets; and timeline and credibility, including a named deal team. Binding provisions are typically confined to exclusivity, confidentiality, expenses and governing law, and legacy, retention and integration language should be expressly non-binding.1

Operational context

What good looks like

Why It Matters

This is the last moment the buyer negotiates with competitive tension behind it. Once exclusivity attaches the seller has no alternative, so any risk term the buyer wants and did not put in the LOI is a term it will be arguing for from a weaker position.1

Term Family

Related concepts

Stock purchase agreement (SPA)

Frequently Asked Questions

What is Letter of Intent (LOI) in M&A in venture capital?

Goodwin's framework for a competitive LOI has six elements: economics, split into cash at close, escrow, holdbacks, earnout and rollover; structure and financing, with confirmation of sources; closing conditions; post-closing strategy; risk allocation, covering insurance, caps and baskets; and...

Why is Letter of Intent (LOI) in M&A important for startups?

Understanding Letter of Intent (LOI) in M&A is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.

Sources & References

  1. 1.T3-29 — Goodwin ProcterCrafting a Competitive LOI (May 2025)Goodwin Procter(A letter of intent fixes price, structure and the walk-away rules before either side spends serious diligence money, and it is mostly non-binding.)secondary · T3 · sell-side-process · document

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