Founders tend to treat the letter of intent as a formality: a non-binding handshake before the real negotiation starts. That’s the mistake. The LOI is the last moment you have full leverage, and everything you leave vague becomes something the buyer defines for you later.
Non-binding isn’t always non-binding
Exclusivity, expense reimbursement and confidentiality provisions are usually binding even when the rest of the LOI is not. Founders sign thinking they still have an out, then discover they’ve already given away meaningful leverage. Don’t sign one without your lawyer reviewing it carefully.
Exclusivity flips the leverage
Before you sign, the buyer is competing for your deal. After you sign, exclusivity hands the leverage to the buyer, and every point you punted gets negotiated on its terms.
The working capital definition is the classic example. Leave the formula, the reference period and the dispute mechanism for the definitive documents, and you’ll negotiate them when you have the least leverage.
What I’d settle, or at least frame, in the LOI
Working capital: The formula, the reference period and the dispute mechanism. Post-closing working capital disputes are won in the LOI definition, not in the fight afterward.
Structure: Asset deal or equity deal, with both modeled. The tax difference usually drives the negotiation, and it’s far easier to settle now than in the documents.
The option pool: Whether the unallocated pool comes off the buyer’s price or off seller proceeds. Left silent, it usually lands on the seller side.
The waterfall: What each dollar of headline price actually returns to founders, employees and rollover holders, instrument by instrument.
Regulatory approvals: Every filing and clearance the deal could need. Approvals discovered at signing can add 60 to 180 days, and the buyer holds the leverage during the wait.
Consents: The change-of-control clauses in your top contracts and your lease. Start the consent chase at the LOI, not at signing.
R&W insurance: Above roughly $30 million of enterprise value, assume it’s on the table. Brokers and underwriters are engaged at the LOI and the policy is bound at signing, so decide now how the premium and retention will be split.
Spend the time
A careful LOI takes longer to negotiate, and some buyers will push you to sign quickly. The time pays for itself many times over. Every item above is cheaper to settle while the buyer still has to win your deal.
Ahmed Hasan is the founder and CEO of Venture Bridge Law, a corporate and M&A boutique. This article is general information, not legal advice.