Letter of Intent (LOI)
Definition
A letter of intent is the preliminary agreement that sets out the headline terms of a deal, price, structure, exclusivity, before full diligence and final contracts. Most of it is non-binding, but the exclusivity and confidentiality clauses usually bind.
In practice
The LOI is where a seller’s leverage peaks: once exclusivity is signed, competition disappears and the buyer starts finding reasons to retrade the price. Experienced sellers negotiate the LOI as if it were the final contract, because economically it often is.