What Is A Letter of Intent (LOI)?
A letter of intent (LOI) is a document declaring the preliminary commitment of one party to do business with another. The letter outlines the chief terms of a prospective deal. Commonly used in major business transactions, LOIs are similar in content to term sheets. One major difference between the two, though, is that LOIs are presented in letter
Understanding A Letter of Intent
LOIs are useful when two parties are initially brought together to hammer out the broad strokes of a deal before the finer points of a transaction are resolved. LOIs often include provisions stating that a deal may only go through if financing has been secured by one or both parties, or that a deal may be squashed if papers are not signed by a cert
Purpose of A Letter of Intent
Letters of intent may be used by different parties for many purposes. Parties can use an LOI to outline some of the basic, fundamental terms of an agreement before they negotiate and finalize all the fine points and details. Furthermore, the LOI may be used to signal that two parties are negotiating a deal such as a merger or joint venture (JV). Ov
Applications of A Letter of Intent
In the context of business deals, LOIs are typically drafted by a company's legal team, which outlines the details of the intended action. For example, in the merger and acquisitions (M&A)process, LOIs detail whether a firm plans to take over another company with cash or through a stock deal. Letters of intent also have applications beyond the busi