An M&A letter of intent sets the commercial framework before the parties invest significant time and money in diligence and definitive documents. Although many provisions are non-binding, poorly drafted terms can weaken negotiating leverage, create false expectations, or expose confidential information.
This guide explains ten terms buyers and sellers should address before signing an LOI, term sheet, memorandum of understanding, or heads of terms.
What is an M&A letter of intent?
The LOI summarizes the proposed structure, valuation, process, and conditions for a transaction. It helps the parties determine whether they have sufficient alignment to proceed. It is not a substitute for the purchase agreement, diligence, regulatory review, or internal approval.
1. Transaction structure
State whether the buyer proposes to acquire shares, assets, a business division, or a controlling interest. The structure affects liabilities, tax, consents, employees, licenses, and closing mechanics. If alternatives remain under review, identify the assumptions and decision deadline.
2. Indicative price and valuation basis
The M&A letter of intent should distinguish enterprise value from equity value. Explain whether the proposal assumes cash-free, debt-free delivery, a normalized level of working capital, and no leakage. A headline number without a price bridge can create major disagreement later.
3. Price-adjustment mechanism
Specify whether the deal will use closing accounts, a locked-box, an earn-out, or a combination. Define major categories of debt, cash, transaction expenses, and working capital at a high level. An illustrative calculation can expose misunderstandings before exclusivity begins.
4. Form and timing of consideration
Identify cash at closing, deferred payments, seller financing, rollover equity, escrow, holdback, and contingent consideration. For an earn-out, outline the performance metric, measurement period, control rights, accounting policies, and maximum payment.
5. Due diligence scope and access
Describe the financial, legal, tax, commercial, operational, technology, cybersecurity, environmental, and human-resources review. Set expectations for data-room access, management meetings, site visits, customer contact, and reliance on advisers.
The buyer should reserve the right to revise or withdraw its proposal based on diligence. The seller should protect sensitive information through staged disclosure and clean-team arrangements where necessary.
6. Conditions to signing and closing
List anticipated board approvals, regulatory clearances, third-party consents, financing, restructuring, and remediation. Avoid describing a condition as routine if it may materially affect timing or completion certainty.
7. Exclusivity and process protection
Exclusivity prevents the seller from soliciting or negotiating competing proposals for a defined period. The M&A letter of intent should state duration, prohibited conduct, permitted responses, notification obligations, and remedies. The period should be long enough for an organized process but not an open-ended restriction.
8. Confidentiality and announcements
Confirm the existing confidentiality agreement or include tailored protections. Address permitted recipients, compelled disclosure, return or destruction, use restrictions, employee contact, public announcements, and the fact that negotiations are taking place.
9. Management, employees, and transition
Record preliminary expectations regarding continued management participation, retention, incentive arrangements, restrictive covenants, and transition support. These provisions are usually subject to further documentation and should not promise employment before approval.
10. Binding and non-binding provisions
Clearly identify which clauses are intended to bind the parties. Confidentiality, exclusivity, costs, governing law, dispute resolution, access, and announcements may be binding, while price and completion obligations remain subject to definitive agreements.
Use explicit language. A document titled “non-binding” may still contain enforceable obligations depending on its terms and applicable law.
Additional terms worth addressing
- Target timetable and responsibility for drafts.
- Allocation of transaction expenses.
- Expected warranty and indemnity package.
- Financing assumptions and proof of funds.
- Required seller reinvestment or rollover.
- Governing law and dispute forum.
- Expiry and termination of the proposal.
Common LOI mistakes
- Quoting equity value without defining debt and working capital.
- Using an earn-out without measurement principles.
- Granting exclusivity before receiving essential information.
- Leaving regulatory risk and timing unaddressed.
- Making inconsistent statements about binding effect.
- Allowing unrestricted contact with customers or employees.
Practical negotiation sequence
- Confirm structure and strategic rationale.
- Exchange a price bridge and funding evidence.
- Agree the diligence scope and timetable.
- Resolve exclusivity and confidentiality.
- Map signing and closing conditions.
- Identify binding provisions.
- Obtain internal approval before signature.
Common negotiation pitfalls in an M&A letter of intent
Sellers often push for broad exclusivity with no exit if diligence stalls, while buyers sign an M&A letter of intent without a defined walk-away right or refund of costs if the seller negotiates elsewhere in bad faith. Both positions create leverage problems later. A better approach ties exclusivity duration to diligence milestones, so either party can point to objective progress rather than arguing about intent after the relationship has soured.
A second pitfall is leaving price language ambiguous. An indicative range without a stated methodology invites a party to claim it was always “subject to adjustment,” which weakens trust heading into definitive documents. The M&A letter of intent should state the valuation basis, the adjustment mechanism, and any assumptions the price depends on, even where the overall commitment remains non-binding.
How Vietnamese buyers and sellers should approach the M&A letter of intent in practice
In Vietnam, an M&A letter of intent frequently precedes a period of regulatory pre-clearance work, such as sector screening, land-use verification, or preliminary discussions with the provincial Department of Planning and Investment. Structuring the exclusivity and diligence timeline around these realistic government-facing steps, rather than a generic cross-border template, avoids a document that expires before the parties can responsibly move to signing.
Local market practice typically favours a 60 to 90 day exclusivity period for mid-market deals, renewable once diligence findings justify continued negotiation. Sellers should expect buyers to request access to statutory financial statements, tax filings, and licences early, and buyers should expect Vietnamese sellers to resist broad access until the M&A letter of intent is signed and confidentiality obligations are confirmed as binding.
A worked example: exclusivity without a walk-away cost
In one mid-market negotiation, a buyer accepted a 120-day exclusivity period with no interim milestones. The seller used the window to solicit a competing offer informally, and by day 90 the buyer had spent significant diligence cost with no contractual leverage to demand good-faith conduct. The fix in the next draft was straightforward: tie exclusivity extensions to diligence deliverables and add a cost-reimbursement trigger if the seller breached the process obligations in the M&A letter of intent.
Frequently asked questions
Can a party walk away after signing an LOI?
Usually the proposed acquisition remains non-binding, but a party may still be liable for breaching binding exclusivity, confidentiality, costs, or process obligations.
How long should exclusivity last?
The period depends on transaction complexity, diligence readiness, regulatory steps, and financing. Milestones can be used to maintain momentum.
Should the LOI include a full warranty list?
It can state expected scope and liability principles, while detailed warranties are developed through diligence and definitive-document negotiations.
What should be in an M&A letter of intent for a Vietnam deal?
At minimum, transaction structure, indicative price and adjustment basis, exclusivity duration, diligence access scope, confidentiality terms, and which provisions are binding versus non-binding.
Is an M&A letter of intent enforceable in Vietnam?
The commercial terms are typically non-binding, but exclusivity, confidentiality, cost allocation, and governing law clauses are commonly drafted as binding and can be enforced.
Read more about IVLF practice areas or contact IVLF for transaction-specific legal support.
Key takeaways before you sign
An M&A letter of intent should never be treated as a formality. Even where most commercial terms are non-binding, the document sets the tone for the entire negotiation and often determines whether a deal reaches signing at all. Buyers and sellers who invest time upfront in a clear M&A letter of intent, with objective milestones, defined price methodology, and realistic timelines calibrated to Vietnam’s regulatory process, consistently close faster and with fewer disputes than those who treat it as boilerplate.
Related M&A guides
Once the M&A letter of intent is signed, attention typically shifts to the M&A purchase agreement, representations and warranties, and earn-out structuring.
IVLF’s Vietnam M&A lawyer team drafts and negotiates the M&A letter of intent alongside the regulatory and diligence timeline, helping buyers and sellers avoid the exclusivity and price-language pitfalls covered above. If you are preparing to issue or respond to an M&A letter of intent, our M&A advisory Vietnam team can review the draft before you sign. Contact IVLF to arrange a review.
Image source: Pexels. This article is general information and does not constitute legal advice.
This article is provided for general information only and does not constitute legal advice for any specific case. Regulations may change – please consult a qualified professional before acting. Should further analysis be required, please contact one of our lawyers below.
