Glossary
Letter of intent (LOI)
A letter of intent summarizes the main terms of a proposed purchase: price, structure, what is included, the diligence period, conditions and target closing date. Once signed, the buyer starts due diligence and the parties draft a purchase agreement.
Most of an LOI is non-binding. Exclusivity (the seller will not negotiate with others for a period), confidentiality and cost provisions are usually binding.
The trap: treating it as a formality. Terms agreed in the LOI are hard to change later. See Writing a letter of intent.