Deal Structure
Letter of Intent (LOI)
Also known as: LOI, term sheet (informal)
A non-binding document that outlines the key terms a buyer proposes before full diligence begins. Signing an LOI typically starts an exclusivity period during which the seller can't negotiate with other buyers.
WHY IT MATTERS
The LOI is where most of the economic and structural leverage in a deal is actually decided. Once signed, the buyer has exclusivity (usually 60-90 days) and a strong psychological anchor — the seller has committed to THIS deal. A prepared seller takes 2-3 weeks to negotiate an LOI carefully because everything after it is a negotiation with reduced leverage. A motivated seller signs in three days because they're worried about losing the buyer. The speed of LOI signing is one of the clearest tells buyers use to gauge seller desperation.