What is a letter of intent in private equity?
Answer in brief
A letter of intent (LOI) is a document in which a buyer sets out the proposed price, structure and key conditions for a deal. In private equity it usually marks the move from bidding into confirmatory diligence. Most of an LOI is typically non-binding, but exclusivity and confidentiality terms are commonly binding, so check the specific wording with counsel.
What a letter of intent covers in practice
An LOI usually follows an earlier indication of interest and comes after management meetings and initial diligence. It typically covers:
- Valuation: headline price or enterprise value, and how it adjusts for cash, debt and working capital.
- Structure: share or asset purchase, rollover equity for management, earn-outs.
- Financing: how the buyer plans to fund the deal.
- Conditions: remaining diligence, approvals, key hires or agreements.
- Exclusivity: a period during which the seller agrees not to negotiate with other buyers.
- Confidentiality and timing: what stays private and a target date for signing the definitive agreement.
The binding parts vary by deal and jurisdiction. This page explains the term, not the law. Check what is binding in any LOI with your counsel.
Illustration: A lower mid-market fund signs an LOI with a 60-day exclusivity period. The deal lead sets a CRM reminder three weeks before it ends, which gives the team time to decide whether to ask for an extension.
How a letter of intent shows up in a CRM
The LOI is usually a pipeline stage and a set of fields on the deal record:
- Fields: LOI submitted date, LOI signed date, proposed value, exclusivity end date, counsel, key conditions.
- Reports: deals under exclusivity, upcoming exclusivity expiries, conversion from LOI to close.
- Documents: a link to the signed LOI in the firm's document system, not a copy pasted into notes.
Public-company acquisitions sometimes disclose signed letters of intent or definitive agreements in SEC filings, which you can find with EDGAR full-text search when building comparables.
Questions & answers
Is a letter of intent legally binding?
Usually most of it is not, but exclusivity and confidentiality terms are commonly binding. The wording decides, so check each LOI with counsel.
What is the difference between an IOI and an LOI?
An indication of interest is an earlier, looser bid, often a value range. An LOI is more specific on price, structure and conditions and usually includes exclusivity.
How long does exclusivity last?
It is negotiated deal by deal. Track the exact end date in the CRM and set a reminder well before it.
Where should the signed LOI live?
Keep the document in the firm's document system and link it from the deal record so the CRM stays the index, not the file store.
Sources for this entry
- SEC EDGAR full-text searchSearch SEC filings, including disclosures of public-company acquisition agreements.
Continue this reading path
- Deal management softwareDeal management software runs the work inside each deal: tasks, documents, team roles, IC memos, diligence tracking, approvals and an audit trail.
- Pipeline management CRMA pipeline management CRM tracks each deal from sourced to closed with clear entry and exit criteria per stage, so reviews and reports stay accurate.
- Pipeline stageA pipeline stage is a named step in the deal process with clear entry criteria. Sample private equity stages, CRM fields and the reports they feed.
- Data roomA data room is a secure online space where a seller shares confidential documents with buyers during diligence. How it relates to your CRM and pipeline.
Cite this entry
Private Equity CRM. “Letter of intent.” Canteris Reference, published by Canteris. Updated . https://privateequitycrm.com/glossary/letter-of-intent/