What’s in a Letter of Intent? (LOI)
You’ve received a Letter of Intent from a Buyer. Congratulations!


Surely you have (months ago):

  1. Hired a trusted advisor/intermediary who helped you decide your minimum acceptable price and terms for your business and confidentially solicited offers on your behalf, 
  2. Signed a Nondisclosure/Confidentiality Agreement with any prospective buyers and monitored the amount and type of info they received as inquiries became more serious,
  3. Shared a carefully vetted set of information with the prospective buyer(s) (vetted by your trusted intermediary) and probably even had a few Zoom calls and an in-person meeting with the majority Owner(s).   

Your serious potential buyer should have a good idea of your business including financial, operations, markets, risk profile, management team and culture.  Part of that sharing will include disclosure of potential issues that may arise in due diligence (prior to receiving a LOI).  With both parties dealing in good faith, diligence “surprises” are rare occurrences and if significant, would be a cause for backing out of a deal.

If all is going well, your buyer will prepare their offer to be made using their own models for financial structure, the price, and terms.   All of this is to ensure a positive process moving forward with the acquisition after entering an LOI.  To get to this point, both parties will by now have a relationship built on trust and careful communication and preparation of the offer.  You, your advisor, and the buyer will have negotiated the major price and terms before the letter is written.  

Buyers typically will make an offer only after they have completed their preliminary analysis of the business and will not renegotiate a deal by changing price or terms after due diligence.  The LOI is largely focused on the business aspects of the deal and while the business team should drive the process of negotiating the terms, the LOI is a legal document and legal counsel should review the document.  

The LOI is a preliminary document and is usually non-binding as to the terms and offer other than certain provisions such as Confidentiality, Exclusivity, Fees and Expenses, Ordinary Course Operations, and Governing LAW.  The majority of the “legal wrangling” will be handled as part of the binding purchase agreement.  

The LOI will outline: 

  • Structure of the Deal (Asset Purchase or Stock Purchase or variation) 
  • Entity(ies)/ Assets being purchased. 
  • Purchase Price, amounts and timing, 
  • When/How/Who will prepare the Definitive Documents 
  • The conditions to closing. 
  • Due diligence period and process 
  • Ordinary Course of Operations 
  • Other terms such as non-compete of seller, employees, leases, representations, and warranties, etc. 
  • Exclusivity (No-Shopping) to be granted during the due diligence period (which may be 45-90 days)   
  • Termination of the offer 
  • Confidentiality 
  • Governing Law
  • Fees and Expenses

While a LOI is not a “marriage contract” it is a serious step in the relationship between buyer and seller and allows the parties a period of “going steady” prior to making the deal permanent.  When the right buyer and seller are committed to formalizing the informal “handshake deal”, the negotiation of the definitive agreements and the due diligence process can form the basis of a successful deal execution.  

If you’d like to discuss your company’s prospects for selling, your interest in buying another company or the process and where you are in your exit planning strategy, we’d be happy to have a confidential complimentary conversation with you about these or any other landscape business transition issues. 

You can reach me via email: [email protected] or on my cell phone a: 224-688-8838.

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Alison Hoffman

has more than 25 years of experience in strategy, operations, mergers and acquisitions and delivering business-to-business client solutions. Her areas of expertise include managing operations for profitable growth, organizational design and strategy activation. She brings a wealth of experience through her work in evaluating, valuing and purchasing over 30 companies, leading company-wide cultural and business integration projects and consolidating best practices among business processes and corresponding computing systems. Read Full Bio