Letter of Intent (LOI)
Definition
A letter of intent (or indication of interest / term sheet, depending on stage) is a preliminary, mostly non-binding document in which a buyer sets out the key proposed terms of a deal: price or price range, form of consideration, structure, financing, key conditions, and timeline.
Most economic terms are expressly non-binding, but certain provisions typically are binding — most importantly exclusivity (a no-shop for a negotiated period), confidentiality, and expense provisions. Exclusivity is the buyer's main prize: it takes the target off the market while confirmatory diligence and the definitive agreement are negotiated.
In an auction, first-round bids are usually IOIs and second-round bids are more detailed LOIs with markups of the draft purchase agreement; the seller trades off price, certainty, speed, and terms in picking a winner.
Why interviewers ask
Process questions like "Walk me through a sell-side M&A process" require you to place the LOI correctly between the CIM/first-round bids and the definitive agreement, and to know which parts bind (exclusivity, confidentiality) versus which do not (price).
Related terms
Interviews don't test definitions — they test recall under pressure.
Drill 1,500+ real questions with spaced repetition. Free to start — 10 reps a day on the house.