Once a business owner has identified a prospective purchaser of his or her business, a letter of intent will typically be entered into. All too often, merger and acquisition (M&A) lawyers are engaged after sellers have signed letters of intent. This approach is a mistake. While the deal terms outlined in letters of intent are usually, for the most part, non-binding, in practice letters of intent have great moral authority. It can be challenging to renegotiate, in connection with preparing definitive transaction documents, items that have agreed to in the letter of intent. 

In addition to outlining the key business terms of a proposed transaction, such as the purchase price, letters of intent should identify key legal terms. This will help ensure that buyer and seller are aligned on these items prior to expending significant resources on the proposed transaction. Moreover, agreeing to key legal terms, on a conceptual level, in the letter of intent is typically more efficient than doing so through multiple "turns" of a purchase agreement and other transaction documents. Finally, in our experience, going into greater detail in letters of intent usually benefits sellers, as sellers frequently have the greatest leverage at the letter of intent stage.