Start Your Deal with the Perfect Letter of Intent with Drooms' Checklist

22. November 2016

The Letter of Intent (LOI) sets the tone of a transaction and it is meant to ground a relationship of trust and good will between parties involved in a negotiation. For you to avoid time-wasting issues or missed opportunities at a later stage of the deal, we have created an LOI Checklist. Download it for free and make sure you start off the negotiations on the right foot!

What: Before the deal, the LOI

The letter of intent is the inaugural piece of an asset transaction of which it sets the initial terms. It doesn’t matter what is the object of the transaction, if the sale of a property, a business or licensing.

It takes different shapes depending on who’s writing them: it might be a list of bullet points sent per email or a more detailed draft of the terms of the acquisition.

The LOI sets the tone of the whole transaction process coming up. Therefore, it is really important to get it right first time.

Why: Making the Difference in a Deal

The LOI is usually not legally binding and this is expressed with references such as “subject to..” (e.g. signature of a definitive agreement or board approval). However, it could include binding elements such as break-up fees. In any case, it is possible to include some provisions regulating the relationship between seller and bidder varying from one context to the other.

The LOI allows the parties to get started with the deal based on a relationship of trust. Also, it permits the stakeholders to have the main points of the deal clear in mind.  

Once the heads of terms has been signed, the parties can get off the due diligence process.

Where Not to Store and Exchange Your Letter of Intent

The LOI should not land in the wrong hands. It usually contains potential purchase prices and potentially provisions of exclusivity. Everybody is aware of this; nevertheless, people continue to send all sort of confidential documentation via email. There are three main risks associated with sharing your material per email:

  1. You can accidentally select the wrong addressee
  2. You won’t be aware if your email is forwarded to somebody else
  3. An email can be exposed to cybersecurity risks

A virtual data room is the weapon of choice for such confidential processes.

Functionalities such as “edit” and “create with approval” will allow the administrators to upload the final version of the document to the data room.

Download Checklist