ShareVault Glossary

What Is an LOI?

A Letter of Intent (LOI) is a nonbinding document that outlines the preliminary terms and conditions of a proposed merger, acquisition, or investment. It marks the beginning of formal due diligence and signals that both parties are serious about pursuing a transaction.

While an LOI is generally not legally binding, certain provisions such as confidentiality, exclusivity, and governing law may be enforceable.

What Does an LOI Typically Include?

A Letter of Intent often outlines:

• Proposed purchase price or valuation
• Transaction structure (asset sale, stock sale, or merger)
• Payment terms
• Due diligence timeline
• Exclusivity period
• Key closing conditions
• Confidentiality obligations
• Target closing date

The LOI serves as a roadmap for negotiating the final purchase agreement and helps align expectations before significant time and resources are invested.

What Happens After an LOI Is Signed?

Once the LOI is executed, the buyer typically begins a comprehensive due diligence process to verify the seller’s financial, legal, operational, and commercial information. This is when a secure virtual data room becomes essential, allowing both parties to share sensitive documents, manage access permissions, and track activity throughout the transaction.

A well-organized data room can help accelerate diligence, reduce delays, and increase buyer confidence, improving the likelihood of a successful closing.