Letter of Intent Template
A standardized document framework that outlines the essential sections and terms a Letter of Intent should contain when proposing a business acquisition.
What is a Letter of Intent Template?
A Letter of Intent (LOI) template is a structured framework that captures the critical terms of a proposed business acquisition in a single document. While every deal is different, a well-built template ensures that no essential provision is overlooked and that both buyer and seller begin negotiations from a clear, professional starting point.
Templates do not replace legal counsel. They serve as a starting point that your M&A attorney can customize to reflect the specific dynamics of your transaction.
Key Sections Every LOI Template Should Include
A comprehensive LOI template covers the following areas:
- Parties -- Full legal names and entity types of buyer and seller.
- Purchase price -- Total consideration, broken into cash at close, seller financing, earnout components, and any equity rollover.
- Deal structure -- Whether the transaction is an asset purchase or stock/equity purchase, along with the rationale.
- Working capital provisions -- Target working capital amount and the mechanism for post-closing adjustments.
- Due diligence scope and timeline -- What the buyer expects to review and how many days they need.
- Exclusivity clause -- The no-shop period during which the seller cannot solicit competing offers.
- Representations and warranties -- A summary of what each party will warrant in the definitive agreement.
- Conditions to closing -- Financing contingencies, landlord consents, regulatory approvals, key employee retention.
- Closing timeline -- Target date for executing the definitive purchase agreement.
- Confidentiality -- Obligations around protecting shared information.
- Binding vs. non-binding provisions -- A clear statement identifying which clauses are enforceable.
How Sellers Should Use an LOI Template
If you are the seller, reviewing an LOI template before you receive offers gives you a tactical advantage. You will know what to expect, which provisions to push back on, and where buyers typically try to shift risk.
Pay close attention to the exclusivity period. A template that defaults to 90 days of exclusivity favors the buyer. Negotiate this down to 30 to 45 days whenever possible.
Scrutinize how the purchase price is allocated. A headline number of $5 million means far less if $2 million sits behind an earnout tied to aggressive performance targets.
Common Mistakes When Using Templates
Relying on a generic template without legal review is the most frequent error. Every transaction has unique tax, regulatory, and structural considerations that a one-size-fits-all document cannot address.
Another mistake is treating the LOI as a formality. The terms you accept at the LOI stage set the anchor for every subsequent negotiation. Concessions made here are rarely recovered later.
Practical Advice
Start with a reputable LOI template, but always engage an experienced M&A attorney before signing. The template frames the conversation. Your attorney protects your interests.