One of the first documents on the table after signing an NDA is usually a kind of pre-agreement in preparation for a definitive agreement. In technical jargon, these are also called “term sheets” or “heads of agreement”. The name itself is less important. What is important is to clearly stipulate the extent to which these preliminary agreements are legally binding for the parties. In principle, they will contain the rules of the game on how the parties will now further explore the acquisition. Depending on the situation, a preliminary agreement will be more or less binding. There is a sense of interest on both sides and an attempt is made to legally define the first parameters of a deal.
This interest is usually expressed in a “Letter of Intent” (LOI). This is a unilateral confirmation by a prospective buyer or acquirer of his interest and indicates a number of parameters of the hoped-for transaction. He makes his intentions known, but confirms that there is no agreement yet. So a LOI is rarely binding, except for certain clauses that have been explicitly agreed upon. But it is and remains important to always look carefully at the text of such a letter of intent, because it can range from a non-binding letter of intent to sometimes even a proposal or offer.
