A letter of intent is three or four pages that determine most of your outcome, delivered at the exact moment you’re least equipped to scrutinize them, because seeing a real number attached to your life’s work makes everyone’s judgment a little drunk. The purchase agreement that follows months later will be fifty pages, but by then the architecture is set. The LOI is where the deal is actually shaped, so here it is, clause by clause, translated.
One framing note before the tour: most of an LOI is deliberately non-binding, which sellers hear as “it doesn’t matter.” Closer to the truth: the non-binding parts set expectations that harden like concrete, and the binding parts (usually exclusivity and confidentiality) cost you real leverage the moment you sign. It matters plenty. It’s just enforceable selectively.
The price clause
“Buyer proposes to acquire substantially all assets of the Company for total consideration of $3,000,000, subject to adjustment…”
Three translation notes. “Total consideration” is the headline, not the check, and the composition matters more than the size: how much is cash at close, how much is an earnout, how much is a seller note or rollover equity. A $3M offer that’s $2.7M cash is a different deal from a $3M offer that’s $1.8M cash plus a $1.2M earnout, and LOIs routinely leave that split vague. Pin it down now, because “we’ll work out the details in the purchase agreement” means “we’ll work out the details after you’ve given up your alternatives.”
“Subject to adjustment” usually points at working capital and debt. It’s standard, and it’s also where proceeds quietly move later, so ask for the adjustment mechanics in the LOI even if they’re rough.
And check what the price is based on. If the LOI says the offer assumes $750k of adjusted EBITDA and diligence finds $680k, expect a proportional reprice. That’s not bad faith. That’s the assumption clause doing its job, and it’s why you want your numbers verified before you anchor on them.
The structure clause
“The transaction will be structured as an asset purchase…”
Asset versus stock purchase changes your taxes, your liability tail, and whether your client contracts transfer automatically or need consents. The difference can be worth six figures on an MSP-sized deal, and it’s negotiable, so this single sentence deserves a call with your CPA before you sign, not after. The tradeoffs are their own topic (our deal structures page covers the toolbox), but the LOI-stage rule is simple: never treat the structure line as boilerplate, because nothing about it is.
The exclusivity clause (binding, and the one that costs you)
“For a period of 90 days, Seller will not solicit, encourage, or entertain other offers…”
This is the clause you’re really granting. From signature until expiry, you can’t shop the deal, talk to the buyer who called last month, or use competition to hold terms steady. Meanwhile the buyer spends the window verifying everything, which means your leverage declines every week while theirs holds. That’s the standard trade and there’s no avoiding it entirely. Serious buyers won’t spend five figures on diligence while you run an auction, and they’re not wrong.
What you can do is keep the window tight and conditional. Sixty to ninety days is normal for a deal this size. Open-ended exclusivity, or a cheap unilateral extension, is a leverage donation. Better: tie extensions to buyer milestones (“extends 30 days provided Buyer has delivered a draft purchase agreement”), so the clock pressures both sides. A buyer who resists any milestone language is telling you how they plan to spend your window.
The contingencies clause
“…subject to satisfactory completion of due diligence, financing, and definitive documentation.”
Translation: the buyer can leave for nearly any reason, politely. “Satisfactory due diligence” has no objective meaning, and a financing contingency means the deal depends on money the buyer doesn’t hold yet. You can’t remove these outright, but you can ask questions that shrink them: what diligence remains, what would cause a reprice versus a walk-away, and how the purchase is being funded. (We covered why the funding answer matters in its own post, and it belongs in your LOI conversation with any buyer.)
The quiet clauses
Confidentiality (binding): usually restates your NDA. Fine. Non-solicitation of employees (binding): sensible during the process, but check it’s mutual. Expenses: each side pays its own, standard. The employee paragraph (non-binding): warm language about retaining your team. If the team’s treatment matters to you, this is where you start converting warmth into terms you’ll later make binding, because anything absent here rarely appears in the purchase agreement unprompted.
How to handle the moment
Three practical rules. First, slow down on purpose: an LOI deserves a week, a lawyer’s read, and a CPA’s read, and any buyer who pressures you to sign in 48 hours has explained their negotiating style before diligence begins. Second, negotiate the LOI itself. Sellers who accept the first draft untouched teach the buyer what the rest of the process will be like, and redlining the exclusivity window and the cash-at-close split is expected, not rude. Third, remember what the document is: the beginning of a four-to-nine month process, not the end of one. Signing an LOI with the wrong buyer wastes a season of your life under exclusivity. The diligence you run on the buyer before this page, references included, is what makes the signature safe.
Get the LOI right and the purchase agreement becomes drafting. Get it wrong and everything after is a slow negotiation against your own signature.