Letter of intent (LOI)

A written, mostly non-binding statement of a buyer's proposed price and terms, which opens due diligence and usually locks the seller into an exclusivity period.

An LOI is the bridge between "we agree in principle" and a binding contract. It states the headline price, the structure (see asset sale vs share sale), key conditions, and a timetable. Most of it is non-binding, with two common exceptions that ARE binding: confidentiality and exclusivity, which stops the seller shopping the deal for a period while the buyer spends money on due diligence.

The seller's leverage peaks the day before signing an LOI and declines through exclusivity. That is why experienced sellers negotiate the important terms INTO the LOI rather than leaving them "for the lawyers later": the price mechanism, what happens to staff, the handover period, and any earnout mechanics.