What should I check before signing an acquisition LOI?

Before signing a letter of intent to buy a business, settle what transaction you are discussing, what remains to be proved, what each party would commit to now and when those commitments end. Put that review beside the actual document. A promising price does not answer the other questions.

An LOI can organize the next stage of an acquisition. It can also create obligations before a purchase is complete. Have transaction counsel identify the effect of the actual language rather than treating the heading “letter of intent” as permission to walk away from anything in it.

Name the deal before the calendar

Consider a fictional buyer, Mara, discussing the purchase of a small equipment-calibration business. The parties have talked about a $280,000 asset price. The proposed scope includes listed equipment and transferable customer work; it excludes the seller's bank cash and old receivables. No purchase has been agreed.

Before sending a document for legal review, Mara's business note identifies the proposed buyer and seller, the asset schedule, exclusions, price basis and intended payment date. Customer agreements need transfer review. The premises lease needs its own examination. Neither “all customers included” nor “same premises” supplies the approvals or rights the buyer would need.

The offer record handles Mara's separate price and funding decision. The LOI review asks what the parties would do next around that proposal. Do not use agreement on a headline price to imply agreement on inventory, unpaid bills, transition work or who pays transaction expenses.

Split proposed terms from present promises

The American Bar Association's Model Stock Purchase Agreement discussion of LOIs distinguishes proposed economic terms from process provisions the parties may intend to bind them. It also emphasizes legal advice before entering the letter. That is a reason to review each provision's effect, not a claim that every LOI has the same binding sections.

Mara asks counsel to mark what the actual draft would do about confidentiality, permitted information use, access, exclusivity, expenses, termination and the obligation—if any—to proceed or negotiate. The review must cover the proposed document and its relevant circumstances. This article's working note is not language to paste into an agreement.

Exclusivity deserves an operational question as well: what work can actually happen during the period being requested? Time unavailable to another buyer has a cost for the seller. An ambitious diligence calendar that nobody can staff does not justify that cost.

Give each open issue a date and owner

Use this original planning case. The parties are considering a review period beginning May 3, 2027 and ending at 5 p.m. on May 28. These dates are proposed, not accepted contractual deadlines. Mara's note assigns the next actions:

1. By May 7: the seller would supply the agreed redacted customer-contract schedule and equipment records through controlled access. Mara's adviser checks whether the pack covers the proposed sale scope.
2. By May 14: transaction counsel would identify transfer and lease issues; the accountant would report the earnings questions that change the purchase case. A requested consent is not recorded as a received consent.
3. By May 21: Mara would compare lender terms with the dated funding need. An introductory lender conversation does not become committed purchase money.
4. By May 25: Mara would decide whether the evidence supports continuing and discuss any proposed changes with the seller.
5. Before May 28: the parties would address unfinished work under the actual document's extension or ending provisions. An extension requested is not time already granted.

The calendar is useful only if the seller and advisers can supply those steps. If important records will not be available until May 24, the May 14 review is not feasible. Change the proposed sequence before signing, or reconsider the period and scope rather than keeping dates everyone already knows will fail.

Authorize the cost of learning

Mara has $12,000 separately available for this review after protecting household money, purchase funding and existing business obligations. The entire review allowance covers $4,500 for legal work, $2,500 for accounting work, $800 for inspection, $700 for travel and secure records, and $1,500 for Mara's own paid review time. That totals $10,000, leaving $2,000 unassigned.

All required work in this finite review fits those supplied quotes and time budgets. Payment would be due as each stage finishes; the full $12,000 is available before May 3. Mara would authorize the listed $10,000, not an unlimited instruction to advisers. Extra work requires a new cost, capacity and timing decision.

If Mara rejects the purchase after the May 14 reports, the completed legal and accounting work still has a cost. A failed purchase does not turn useful diligence into a refund. Record what has been authorized, incurred and paid separately. The unused allowance is not a reason to commission a review that cannot change the decision.

Close the open issue with evidence

Imagine the May 14 review finds that an important service agreement requires consent, and no consent has been obtained. Record the finding, the affected operating assumption and who will pursue the next answer. Do not convert “the seller expects it” into “transfer confirmed.” The seller-information guide shows how to turn a vague gap into a proportionate evidence request.

At the final review, use three statuses: established, unresolved with a defined next step, or unacceptable for this proposal. Then follow the actual LOI's provisions with counsel. A clean working note cannot itself end a binding commitment.