Practical Considerations for Business and Real Estate Owners Negotiating a Letter of Intent

Nemat Law Firm Team
Man Signing Contract

The Letter of Intent also known as LOI is a contract that can be binding or non-binding. Oftentimes, it begins the acquisition process. Here are five important considerations when it comes to the LOI.

The Why

In commercial acquisitions of less complexity, a buyer may submit a purchase and sale agreement without the interim use of a letter of intent. However, there are many scenarios in which tremendous details involved in the deal require fairly sophisticated businesses to reach definitive common grounds before a binding purchase and sale agreement is drawn. 

The reason is that negotiations on all the wide range of details may be time consuming, necessitate the involvement of transactional attorneys and CPAs and hence become costly. The buyer faces the risk that parties do not reach a consensus on all grounds and the deal does not materialize. To make things even more complicated, once a purchase and sale agreement is reached, the deal may fall through in the due diligence phase. 

To avoid unnecessary sunk costs, it is customary for sophisticated businesses to utilize a LOI and then begin due diligence and draft the purchase and sale agreement. If parties are on the same page and reach an agreement on the LOI, then it’s cost-effective to move forward with the process.

Components of the LOI

There are various building blocks to a LOI. The purchase price, escrow agent, methodology of disbursement, amount of earnest money, whether earnest money will be refundable, whether account receivables are included, duration of due diligence, the information & documents seller shall disclose, warranties and representations, whether there are any commissions to be paid, whether there is a real estate component and many more. Typically, the binding provisions in a LOI are exclusivity in negotiations, confidentiality, and termination penalties if any. 

Restrictive Covenants

Buyers may also have an incentive to ensure the inclusion of restrictive covenants in the LOI. This may include but is not limited to non-solicitation, non-compete, and trade secret clauses.

Liability Considerations

Deal Structuring impacts future liability in more ways than explainable in one short article. It is crucial for a buyer to think creatively and understand how structuring the deal impacts liability. Generally, a buyer will have the option of purchasing the stocks of a business or alternatively, the assets of a business.  The main consideration is limiting the pre-closing liabilities of the business for future owners as well as ease of maintaining account receivables post closings. While an asset purchase limits liabilities, it is crucial in such structuring to be clear on what assets are transacted and the impact on account receivables. 


Negotiating a LOI or a purchase and sale agreement is a mixture of art and science. Businesses are generally evaluated based on three accepted approaches of 1) income approach, 2) market approach and 3) asset approach. The key variables in each approach is different so it is important to have familiarity with them. The LOI is the best time to dictate the favorable methodology which ultimately impacts the purchase price. 

There are many details to a well developed LOI. The process of acquisition of a business is complex and may not always be a win-win. To avoid unpleasant surprises, consult with your team of experts to ensure you set yourself up for success.  

Client Reviews

Mr. Sasan Nemat was a true Professional from beginning until the end. Hw handled my eviction case for me. He was knowledgeable and trustworthy.

Ivonne A.

I highly recommend Nemat Law Firm !! From start to finish Sasan was knowledgeable, honest , and proficient in handling my case. I am so grateful and please with the high level of professionalism that I...

Laqua A.

I Contacted Nemat Law Firm 2 days before my court date. Not only did someone answer my call, but they also took on my case. With less than 48hrs to gather information from me. Mr.Nemat stayed available around...

Lynette C.

I had a unique type of situation and was hard to find a lawyer to help me but thankfully I came across him! Assistant Katie is so sweet and and Mr. Nemat was so kind and professional and listened very well. He...

Aneka M.

I highly recommend NEMAT LAW FIRM if you have landlord issues as a tenant, My Attorney was unable to appear on my court date but he handed my case over attorney NEMAT a day for the court date but he quickly...

Emmanuel U.

My father and I worked with Mr. Nemat, and all I can say is we Won. Mr. Sasan is very polite regardless of which party he is addressing. My father raved about him completely. I have noticed some of the best...

Melissa A.

I have Nemat Law Firm on retainer and been using their services for over two years. As a business owner it's been very helpful to have them as my legal counsel. They also have worked on multiple real estate...

Park Creek Dental Care

My apartment was flooded when the sprinkler system in the neighbor's apartment above was activated. The apartment management was indifferent to my concerns. They ignored phone calls and emails, did not seem to...

Robert T.

Mr. Sasan and The Nemat Law Firm provided me with answers to all the questions I had regarding my unique case. We were on tight schedule before my approaching court date and he was able to GET IT DONE. He was...

Sameer A.

I was illegally dispossessed of my property by two dishonest people who lived with me in the same house. He delivered me an effective, quick, and competent service by contacting the wrongdoers who finally were...

Vittorio I.


Business Hours: Monday - Friday: 8:30 am - 5:30 pm (Email or Text for After Hours Availability)

Atlanta Office
3340 Peachtree Rd #2570

Atlanta, GA 30326

Get in Touch

Fill out the contact form or call us at (770) 285-8008 to schedule your consultation.
  • Group-2.png Proficiency, Honesty, and Efficiency
  • Availability.png Aggressive Representation
  • No-Fee.png We Fight for You!

Leave Us a Message