Glossary · Deal structure

Letter of Intent (LOI)

A Letter of Intent is a typically non-binding term sheet capturing the headline commercial terms of an acquisition between buyer and seller before due diligence begins.

Definition

The LOI sits at the pivot point of an acquisition: pre-LOI everything is informal, post-LOI exclusivity runs and both parties invest in expensive diligence. Contents are usually: indicative price and structure (share vs asset), exclusivity window (typically 60-90 days), the scope of due diligence, any earn-out, confidentiality, and a break-fee for unilateral withdrawal.

In Belgium and the Netherlands an LOI is usually non-binding overall, with binding clauses for confidentiality, exclusivity and cost allocation. Sellers watch out for: over-wide exclusivity, vague DD scope, and price-adjustment clauses that leave the buyer too much post-LOI optionality.

Worked example

Example: a Brussels software firm signs an LOI at €4.2m share purchase, 75 days exclusivity, DD scoped to financial + legal + IT-security. A non-binding €300k earn-out tied to Y1 customer retention. €25k break-fee on either side after week 6 without cause. The final SPA follows DD and carries the same economic terms: any deviation requires explicit justification.

When it matters

Every serious SME acquisition passes through an LOI. Avoid "informal email agreements": they leave no legal foothold and lead to disputes over what was agreed. Even a non-binding LOI gets signed through your advisor or lawyer.

Read: binding vs non-binding LOI

Frequently asked

Is an LOI binding?: In Belgium and the Netherlands an LOI is usually non-binding overall, with the exception of confidentiality, exclusivity and cost allocation. Always read clauses individually: some LOIs are genuinely binding on price.
How long is a typical exclusivity period?: 60 to 90 days for Benelux SMEs, sometimes extendable by 30 days with mutual consent. Beyond 120 days is too long: the seller risks losing market interest.
What is the difference between LOI and term sheet?: In Anglo-Saxon M&A "term sheet" is used more often for VC rounds; "LOI" for M&A. Functionally identical in Benelux practice.
Should I involve a lawyer for the LOI?: Yes: even a non-binding LOI contains binding clauses. The cost of a good LOI review (€2-5k) is negligible against the cost of a bad clause that hurts you 12 months later.

Related terms

Earn-out- An earn-out is a deferred payment the buyer owes the seller if the business…
Dataroom (VDR)- A dataroom is the secure online space where the seller organises every due-diligence document…

Definition

Worked example

Frequently asked

Is an LOI binding?

In Belgium and the Netherlands an LOI is usually non-binding overall, with the exception of confidentiality, exclusivity and cost allocation. Always read clauses individually: some LOIs are genuinely binding on price.

How long is a typical exclusivity period?

60 to 90 days for Benelux SMEs, sometimes extendable by 30 days with mutual consent. Beyond 120 days is too long: the seller risks losing market interest.

What is the difference between LOI and term sheet?

In Anglo-Saxon M&A "term sheet" is used more often for VC rounds; "LOI" for M&A. Functionally identical in Benelux practice.

Should I involve a lawyer for the LOI?

Yes: even a non-binding LOI contains binding clauses. The cost of a good LOI review (€2-5k) is negligible against the cost of a bad clause that hurts you 12 months later.