SOP #46 — "The LOI is just a formality" is wrong

SOP #46 — "The LOI is just a formality" is wrong

Myth: the letter of intent is paperwork; the real deal happens later. Correction: the LOI sets the rules of the entire negotiation and what you can still walk away from. Use it to lock leverage:

1. State the price and the assumptions it's based on — "$X assuming verified TTM net of $Y."
2. Set an exclusivity window (14–30 days) so the seller stops shopping while you spend diligence hours.
3. Define the inspection period and your unconditional right to exit during it.
4. List exactly which assets are included — kill "of course the email list is included" disputes now.
5. Make it non-binding on price but binding on exclusivity and confidentiality.

A vague LOI hands renegotiation power to the seller. A precise one is your contract's skeleton.

Save this — run it every deal.