How to Write a Winning Letter of Intent (LOI) — With Template

What a Letter of Intent actually does

The LOI is the bridge between casual interest and signed legal documents. It sets price, structure, and timeline; it grants the buyer exclusivity to run due diligence; and it keeps the seller from running parallel negotiations. Most LOIs are non-binding on the deal itself, but binding on confidentiality and exclusivity — read every clause carefully.

The 9 sections a good LOI contains

- Parties and structure (who is buying what — assets, shares, or a holdco)

- Purchase price and how it will be paid (cash at close, seller note, earnout, escrow)

- Working-capital treatment (the "peg" and how excess/shortfall is handled)

- Contingencies (financing, satisfactory due diligence, key-employee retention)

- Exclusivity period (usually 30–60 days)

- Confidentiality (binding — survives termination)

- Conditions to closing (regulatory, third-party consents)

- Expense allocation (each party usually pays its own advisors)

- Governing law and dispute resolution

Clauses worth fighting over

Exclusivity length is the buyer's leverage — sellers should resist anything over 60 days. The working-capital peg is where 80% of post-LOI fights happen — agree on the methodology (e.g., trailing 12-month average) in the LOI, not afterward. Earnout language must be specific: who controls the business during the earnout, what protections exist for the seller, and what counts as a "qualifying" sale.

What NOT to include

Don't put your final price in the first draft if you have room — start 10–15% below your walk-away. Don't agree to a no-shop without exclusivity expiration. Don't skip the financing contingency unless you're writing a cash check.

Template (copy and adapt — get counsel review)

Dear [Seller], This Letter of Intent ("LOI") summarizes the terms under which [Buyer] proposes to acquire [Target]. The proposed purchase price is $[X], payable [structure]. Working capital at closing shall be [peg]. This LOI is contingent on [diligence/financing]. The parties agree to a [60]-day exclusivity period, during which Seller will not solicit or accept other offers. Confidentiality obligations under our [NDA dated X] survive termination of this LOI. Each party shall bear its own expenses. This LOI is non-binding except for sections [Exclusivity, Confidentiality, Expenses, Governing Law].

What happens next

Once both parties sign, due diligence begins. Sellers should populate their data room before signing so day-1 of diligence is productive. Buyers should issue a comprehensive document request within 48 hours of signing — the exclusivity clock is ticking.