A Letter of Intent (LOI) — sometimes called a Term Sheet or Offer to Purchase — is the document signed by buyer and seller before formal due diligence begins. It is mostly non-binding (meaning either side can walk away) but typically includes binding provisions around confidentiality, exclusivity, and expense reimbursement. The LOI sets out the headline purchase price, deal structure (asset or share), working capital target, proposed financing conditions, exclusivity period (usually 30 to 90 days), and key conditions to closing. A well-drafted LOI is arguably the most important document in the deal because it establishes the framework for everything that follows. Sellers who feel the LOI is vague will re-trade terms during due diligence. Buyers who sign a weak LOI can find themselves trapped in a bad deal structure with no leverage. In Canadian practice, LOIs are often two to five pages for smaller deals and ten to fifteen pages for mid-market transactions. Working capital targets, asset inclusions, and earnest money provisions should always be explicitly defined.
A buyer in North Vancouver signs an LOI to acquire a landscaping company for $850,000 in an asset deal. The LOI specifies 45 days of exclusivity, a working capital peg of $65,000, a $25,000 deposit held in trust, a vendor take-back of $150,000, and a financing condition requiring BDC approval. The seller cannot talk to other buyers while the LOI is live.
Process knowledge is what separates buyers who close on good terms from those who pay too much or miss problems. Ali applies 17+ years of Canadian acquisition experience to every step.