Introduction

In M&A, the Letter of Intent (LOI) is often treated as a formality. It is not. The LOI is the first real stress test of the deal. If it is vague or poorly drafted, you are gambling with millions. At Dups, we see the LOI as a strategic asset, not paperwork. Here is why it matters, what it should include, and how to avoid costly mistakes.

What is an LOI and Why Does It Matter?

In Belgian M&A, the Letter of Intent (LOI) is a critical document that frames the main commercial terms and sets the process for the transaction. It is not just a formality or a courtesy. The LOI is where leverage is won or lost: it defines the tone, scope, and timeline for due diligence and negotiations.

- For buyers, a strong LOI must be clear, credible, and attractive enough to be selected by the seller, especially in competitive processes where several offers may be on the table.

- For sellers, the LOI is the first round of acceptation: it signals which buyer is serious, well-prepared, and likely to close.

A strong LOI reduces uncertainty, accelerates closing, and protects your negotiating position.

A weak LOI creates loopholes that can be exploited later, leading to delays, renegotiations, or even deal failure.

The risks of a weak LOI

A poorly structured LOI sets the stage for problems later:

- Price drift: Buyers renegotiate because key assumptions were never locked in.

- Timeline creep: Without clear milestones, diligence drags and momentum dies.

- Exclusivity traps: Sellers lose leverage when exclusivity terms are too broad or too long.

- Hidden conditions: Ambiguous precedent clauses give buyers an easy exit.

Every one of these risks costs time, credibility, and often millions. In Belgium, where investor caution and legal complexity are the norm, these mistakes are magnified.

Key components of a strong LOI

A well-drafted LOI should cover:

- Price and structure: Fixed price, earn-outs, or hybrid models.

- Payment terms: Timing and conditions for each tranche.

- Exclusivity: Duration and scope, with clear limits to protect leverage.

- Conditions precedent: Regulatory approvals, financing, and due diligence requirements.

- Timeline: Milestones for diligence and signing.

- Binding clauses: Confidentiality, exclusivity, and governing law.

Clarity here avoids disputes later.

A well-drafted LOI achieves two critical goals:

- Protects your negotiating power by defining non-negotiables early.

- Signals professionalism to the buyer, which often translates into smoother diligence and fewer surprises.

In short, the LOI is where leverage is won or lost. Treat it as “just paperwork” and you risk losing control before the real negotiation begins.

Impact on later stages

The LOI sets the tone for everything that follows: due diligence, warranties, closing. If it is vague, expect:

- Endless renegotiations during diligence.

- Buyers pushing for broader warranties and indemnities.

- Delays that erode momentum and value.

Conversely, a strong LOI accelerates diligence, reduces friction, and signals professionalism. Buyers respect entrepreneurs who run a disciplined process.

Why it matters for entrepreneurs

Executing a company sale, purchase, or fundraising round is not just about price; it is about process. The LOI sets the tone for everything that follows: due diligence, warranties, closing. If you want confidence and control, you need an LOI that anticipates risks and locks in the essentials.

The role of advisors

Why involve an advisor at LOI stage? Because this is where leverage is built. A strong LOI:

- Locks in key assumptions before diligence.

- Reduces renegotiation risk.

- Signals professionalism to buyers and investors.

At dups, we combine financial and legal expertise under one roof. We help entrepreneurs define price structure, negotiate earn-outs, and draft LOIs that protect their interests. Our boutique model means we work with a select number of deals per year, ensuring full attention and speed. With our network of Belgian investors and European funds, we also help create competitive tension, which often adds 10–20% to the final price.

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