Introduction

“The most difficult thing in any negotiation, almost, is making sure that you strip it of the emotion and deal with the facts.” – Howard Baker, US Senator

For my money, the letter of intent (LOI) is the most significant document in an M&A transaction, eclipsing the importance of even the purchase agreement. This is because, in most cases, the prices and terms you ultimately receive are more affected by negotiations over the LOI than the purchase agreement. 

Let that sink in. For most sellers, how you negotiate the LOI is more important than how you negotiate the purchase agreement. Signing a strong LOI that protects your interests puts you out in front of the pack as you head to the finish line. A weak LOI is more akin to heading to that finish line but in a three-legged race. In this chapter, I’ll discuss the characteristics of an LOI, how best to negotiate your letter of intent, and how to use leverage to ensure you get the best deal possible.