FAQ

What should I watch in a letter of intent?

Direct answer

The price gets the attention, but exclusivity length, the working capital definition, escrow size and duration, the earnout terms, and the scope of the non-compete are where the money actually moves.

More detail

A letter of intent is mostly non-binding on price and mostly binding on exclusivity, which means signing it hands the buyer a window, commonly 60 to 90 days, in which no one else can compete for the company. Everything not nailed down before signing gets negotiated from a weaker position afterward. The terms worth fighting for at this stage are the working capital target and how it is calculated, the escrow amount and how long it is held, the survival period for representations, the earnout mechanics if there is one, and the geographic and time scope of the non-compete. North Carolina courts will not rewrite an overbroad covenant to make it enforceable, so a covenant drafted too widely can fail entirely, which matters to both sides.

Authoritative sources

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