The letter of intent is where a seller has the most leverage and usually gives it away. Signing grants exclusivity, and from that moment the buyer is the only buyer. Everything you care about should be written down before that, because afterwards you are negotiating alone.
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Letter of intent M&A terms: settle the structure, not just the price
Asset or share sale. What is included and excluded. How cash and debt are treated. The working capital target and how it is measured. Any escrow, seller note or earnout and their terms in outline. A price agreed without these can move by a fifth once they are pinned down, and by then the competition has gone.
What is binding even when the price is not
Exclusivity, confidentiality, and who pays their own costs are usually binding clauses in an otherwise non binding document. Read the exclusivity period and whether it extends automatically. Ninety days is common; an open ended period with automatic extension is a standstill you did not agree to.
What to add before you sign
A diligence list with a deadline, so the process cannot drift. A statement that the price assumes the information already provided is accurate, which makes a later retrade about something you disclosed harder to justify. And your intentions about staying on, because that is part of what is being bought.
Questions people ask about loi M&A
Is an LOI binding?
Mostly not on price and terms, but usually binding on exclusivity, confidentiality and costs. Those binding clauses are the ones to read closely.
How long should exclusivity run?
Long enough for genuine diligence and no longer. Sixty to ninety days is common, with extension by agreement rather than automatically.
Can I negotiate with others after signing?
Not during exclusivity, which is the point of it. That is why the terms have to be right before you sign rather than after.