LOI Guidelines
LOI Guidelines
Canonical: https://tuckadvisors.com/loi-guidelines
Last updated: 2025-12-16
Overview
These guidelines cover the essential elements to include in a Letter of Intent (LOI) when engaging in a transaction. They serve as a reference for parties involved in negotiations to ensure clarity and comprehensiveness in their proposals.
Definitions
- Price: Cash, stock, and any earnout provisions (if applicable).
- Structure: Stock or asset purchase.
- Indemnity Caps: Limits on indemnity obligations.
- Indemnity Terms: Specifies who will provide indemnity (e.g., stockholder, major stockholders, Seller) and whether obligations will be joint and several.
- Survival Period: Duration for which representations and warranties remain effective, including categorization of fundamental vs. non-fundamental representations.
- Escrow Amount: Any amount held in escrow, including the time period.
- Working Capital Framework: Framework for working capital adjustments and mechanics.
- Terms of Employment: Conditions for management employment (if any).
- Restrictive Covenants: Any restrictions placed on management (if any).
- Venue and State: Location for conflict resolution.
- Internal Process: Steps required to approve the transaction.
- Due Diligence Timeline: Estimated start and end dates for due diligence.
- Drafting Timeline: Estimated date for the first draft of the purchase agreement.
- Closing Date: Estimated date for the transaction's closing.
Process/Timeline
Evaluate Offer: Address the following in your LOI:
- Structure
- Process
- Additional information that helps frame your LOI.
Due Diligence:
- Estimated start date and end date for due diligence.
- Estimated date of first draft of purchase agreement.
- Estimated closing date for the transaction.
Context for usage
These guidelines are referenced when drafting a Letter of Intent to ensure that all critical components are included, facilitating smoother negotiations and clearer expectations between parties involved in a transaction.