Tuesday, April 21, 2009

Tuesday Tidbit - 4/21 edition -- letters of intent

I'm on vacation this week, which explains the dearth of posting. But I did run across an item from South One Capital's blog that made me want to say something quick about letters of intent.

An LOI, while generally non-binding, is important for two reasons: first, as the post says, most institutional investors will seldom look at a deal without an LOI. This is as true for sales and leases as it is for loans.

Second, the LOI is the general road map for the structure of the deal. Yes, things can change, but if deal terms change thereafter then you get accused of retrading. That's okay, of course, but be prepared. But more importantly, often key issues that impact the legal side get negotiated in the letter of intent. I am not giving everything away for free, but believe me, there are many things that a good lawyer can help you with here.

Moral of the story? Get your lawyer involved now, at the beginning of the deal. You may spend a few extra dollars but the lawyer could end up saving you more down the road in money, time and headaches.