Why a Letter of Intent Should be Strategic

by John Dearing, Capstone Managing Director

I recently read an article that listed some standard items, such as type of transaction, employment, transaction contingencies and conditions, to include in a LOI. While I don’t disagree with this “standard” list, I would prefer that the LOI address the strategic intent of the two parties.

The LOI is non-binding as a general rule and as such it should outline the business terms agreed upon to the extent possible while acting as a key milestone before both parties expend the additional resources to perform formal due diligence and paper the deal (with the appropriate level of legalese to cover both risks and deal parameters).

* For more on the strategic purpose of a LOI, read How a Letter of Intent Can Save Your Deal

Photo Credit: Mukumbura via Compfight cc

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