Crafting a Letter of Intent (LOI) for M&A

In this first episode of a two-part series, Deal-by-Deal podcast hosts Greg Hawver and Jeff Brooker discuss best practices for M&A deal letters of intent. 

Both hosts have seen deals tripped up by poorly crafted letters of intent. When buyers and sellers are unclear on what to include in an LOI, what is binding and what is not, and how to leverage exclusivity, deals can go sideways before they even get a chance.  

“It's a critical document, especially for independent sponsors,” explains Greg. “This is what you're showing to your capital providers, and it best describes the terms of their investment.”

Listen in for advice on crafting an LOI, including what terms to include in the letter, and missteps you should watch out for. It is just as important to understand what an LOI can be used for as it is to understand what LOIs can't be used for. Jeff shares that the time investment in a well written LOI is so beneficial that lawyers are typically happy to provide a review off the clock. 

Be sure to check out the second episode in this series, which will cover equity term sheets between independent sponsors and capital partners. 

Meet Your Hosts

Name: Gregory Hawver

Title: Partner at McGuireWoods

Specialty: Greg represents private equity and strategic clients in a wide variety of change-of-control transactions, minority equity investments, domestic and cross-border acquisitions, recapitalizations, joint ventures, and corporate reorganizations, as well as advising clients on day-to-day corporate matters. 

Connect: LinkedIn

Name: Jeff Brooker

Title: Partner at McGuireWoods

Specialty: Jeff focuses his practice on advising private equity funds, venture capital funds, and other institutional investors and strategic acquirers in connection with mergers and acquisitions, early- and late-stage investments, leveraged buyouts, recapitalizations, management buyouts, and secondary transactions.

Connect: LinkedIn 

Acquired Knowledge

Top takeaways from this episode 

• Balancing a desire for exclusivity without losing leverage can be a challenge. Once exclusivity is given to a seller, so is some of the leverage within that deal.
• The majority of an LOI is not going to be binding. An LOI includes the terms related to the purchase price, deal structure, and the party’s understanding of the deal at that moment in time, with the understanding that the deal may change.
• There are key terms an LOI should cover to avoid miscommunication. Work with your lawyer to ensure any LOI you’re putting together includes key terms. These include exclusivity and the structure of the transaction.

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This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information, or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.