Letter of intent: what to check before you sign an LOI for your store

Short answer. A letter of intent sets out the main terms of a sale before due diligence: price, structure, what's included, exclusivity, timetable and conditions. Most of it isn't binding, but exclusivity and confidentiality usually are. It's the last moment you have full negotiating power, so vague terms here become arguments later.

Key takeaways

• The letter of intent (LOI) is where the deal takes shape. The purchase agreement is drafted from it.
• Price is rarely binding at this stage. Exclusivity usually is.
• Check what the price includes, how and when you're paid, and what happens if numbers move.
• Keep exclusivity as short as due diligence needs, with a clear end date.
• Have a lawyer with M&A experience read it before you sign.

What is a letter of intent?

A letter of intent, sometimes called a term sheet or heads of terms, is the document a buyer sends when they want to move from "interested" to "let's do this". It sets out the main terms they're proposing, and asks you to stop talking to other buyers while they check the business.

It's not the final contract. That's the purchase agreement, which comes after due diligence. But the purchase agreement is built on the letter of intent, and anything left vague here gets decided later, when you have less negotiating power.

Which parts are binding?

It depends on how it's written, and the letter should say so explicitly. Typically:

• Non-binding: price, structure, timetable, most commercial terms.
• Binding: exclusivity, confidentiality, sometimes who pays which costs, and the governing law.

That combination is why the letter of intent matters so much. You're giving up your alternatives in exchange for terms that can still change.

What should a letter of intent for an eCommerce business include?

The price, and what it buys

• The headline price.
• What's included: brand, domain, store, inventory, social accounts, customer and email lists, supplier contracts, trademarks.
• Whether it's a sale of the company or of its assets. We compare the two in asset sale vs share sale.
• Which profit figure and period the price is based on.

How and when you're paid

• How much at signing or closing.
• How much later, and when.
• Any part tied to future results, with the metric, the period and how it's calculated. See earn-outs explained.
• Any part you lend to the buyer (seller financing), with rate, term and security.
• Any amount held back in escrow, for how long and against what.

Inventory

Whether stock is included at a normal level or paid on top at landed cost, how it's counted and valued, and how old or damaged stock is treated. More in suppliers and inventory in a sale.

Due diligence

What the buyer will review, roughly how long it will take, and what you'll provide. A scope avoids open-ended document requests.

Conditions

What has to happen before closing: financing, approvals, satisfactory due diligence, key contracts transferred, key people staying. Watch out for conditions that give the buyer a free exit at any time.

Exclusivity

How long you won't negotiate with others, with a clear end date. Conditions for extending it.

Transition and non-compete

How long you'll stay to hand over, doing what, and whether you're paid for it. The scope of the non-compete: which products, which markets, how long.

Employees and contractors

What happens to people who work for the business, if anyone.

Timetable

A target date for signing and closing. Not a promise, but a shared expectation.

Which clauses deserve extra attention?

"Up to" prices

"Up to €X" usually means a smaller amount at closing and the rest dependent on conditions. Read it as the minimum you're sure to receive.

Vague earn-out terms

"Payment based on performance" isn't a term. The metric, the period, the accounting rules and your access to the numbers all need to be written down.

Financing conditions without evidence

If the deal depends on the buyer getting a loan, ask about the lender, the stage of the application and what happens if it fails.

Long exclusivity

Every week of exclusivity is a week your alternatives cool down. Long exclusivity also makes a re-trade easier, because walking away gets more expensive for you.

Broad due diligence

"Any information the buyer may request" invites an endless process. A defined scope with a timetable is fairer to both sides.

Working capital and inventory adjustments

If the mechanism isn't defined, it will be argued about at closing. Define "normal" stock and how differences are paid.

What does a letter of intent look like? (illustrative outline)

Every buyer has their own template, and the order changes. This illustrative outline shows the sections you'd expect for a small eCommerce deal, with the questions to ask about each:

1. Parties. Who is buying? A person, a company, a fund vehicle? If it's a newly formed company, who stands behind it?
2. Transaction. Shares or assets, and the list of assets if it's an asset deal.
3. Price. Headline, the profit figure and period it's based on, and adjustments.
4. Payment. Closing payment, deferred payments, earn-out, seller note, escrow.
5. Inventory and working capital. Included or on top, how counted, how valued.
6. Due diligence. Scope, documents, timetable.
7. Conditions to closing. Financing, consents, satisfactory due diligence.
8. Transition. Your role after closing, hours, duration, payment.
9. Restrictive covenants. Non-compete and non-solicit: scope, territory, duration.
10. Exclusivity. Length, end date, extension conditions.
11. Confidentiality. Usually binding, often referring back to the NDA.
12. Costs. Each side pays its own, unless agreed otherwise.
13. Binding and non-binding terms. Listed explicitly.
14. Expiry. The date by which you must accept.

Short is fine. A two-page letter that covers these points clearly is more useful than ten pages that leave the payment terms vague. If a section is missing, ask for it before signing rather than "agreeing it later".

How do I compare two letters of intent?

Line them up and convert each into the same view:

Then ask: how sure am I of each part? Money at closing is certain. Fixed deferred payments depend on the buyer's ability to pay. Conditional payments depend on targets and on how the buyer runs the business. A lower headline with more at closing often wins.

Before you sign

1. Make sure your numbers are ready for due diligence. A letter of intent signed with messy numbers is an invitation to renegotiate. Our due diligence checklist helps.
2. Disclose known problems now. Anything disclosed before the letter of intent is part of the price.
3. Ask a lawyer with M&A experience to review it, especially the binding clauses.
4. Tell other buyers politely that you're entering exclusivity, without closing the door.

How WiseExit helps

We handle the offers, the buyer's checks and the terms: payment schedule, handover, non-compete. We compare offers side by side, not just on the headline price, so you sign when the deal is right.

If you're not there yet, start with a number. Request a free valuation: answer in 24 hours, zero upfront costs, commission only at closing.