Letter of intent (LOI)
A document setting out proposed price and principal transaction terms, generally subject to diligence and definitive agreement. Some provisions, such as confidentiality or negotiated exclusivity, may be binding; their scope depends on the document and law.
Also called LOI, Letter of intent
Letter of intent (LOI) in practice
Hypothetical: an indication of interest (IOI) is followed by an letter of intent (LOI) stating a proposed price and an agreed exclusivity period. Exclusivity restricts specified seller conduct; it does not prevent every unsolicited competing approach. The proposed price remains subject to the agreed process and conditions.
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| Stage | Meaning |
|---|---|
| IOI | Preliminary interest and indicative terms |
| LOI and agreed exclusivity | Proposed deal terms; specified binding obligations |
| Exclusivity expiry | A contractual milestone, possibly extended |
| Possible closing | Only if required conditions and agreements are satisfied |
Shayne Fitz-Coy’s definition of Letter of intent (LOI)
An LOI is the moment a buyer says we are really interested in your business. There is a time limit, and there is exclusivity, which means please do not take this anywhere else.
Most of it does not bind anyone. The exclusivity is the part that does, and it is the part a seller should read hardest.
Terms Related to Letter of intent (LOI)
Exclusivity · IOI & non-binding offer · Term sheet · Due diligence · SPA / definitive agreement · All of the glossary