Letters of Intent and Memorandums of Understanding serve different purposes in M&A. Using the wrong one can cost you leverage-or create unintended obligations.
A preliminary agreement outlining the key terms of a proposed acquisition, typically including price, structure, exclusivity, and conditions. Used to lock in deal terms before due diligence.
A broader agreement documenting mutual intentions between parties, often used for partnerships, joint ventures, or preliminary discussions. Less transaction-specific than an LOI.
For business acquisitions, use an LOI. MOUs are better suited for partnerships, joint ventures, or early-stage exploratory discussions where you're not yet ready to negotiate specific transaction terms.
If someone sends you an "MOU" for an acquisition, treat it like an LOI and review it with the same scrutiny-the title doesn't change the legal effect of the provisions inside.
LOI vs MOU Comparison
| Factor | LOI | MOU |
|---|---|---|
| Primary Use | Business acquisitions, M&A deals | Partnerships, JVs, preliminary discussions |
| Deal Specificity | Highly specific: price, terms, structure | General intentions and framework |
| Exclusivity Clause | Standard and expected | Uncommon |
| Due Diligence Rights | Explicitly granted | Rarely addressed |
| Binding Provisions | Specific sections (exclusivity, confidentiality) | Often entirely non-binding |
| Timeline to Close | Typically 60-120 days specified | Open-ended or unspecified |
| Break-Up Provisions | May include fees or expense caps | Rarely included |
| Legal Review | Essential-M&A attorney required | Recommended but less critical |
When to Use LOI vs MOU
Common LOI vs MOU Mistakes
The title doesn't determine enforceability-the language inside does. An "MOU" with binding exclusivity provisions is just as enforceable as an "LOI" with the same language.
If you're acquiring a business, the seller will expect an LOI. Proposing an MOU signals you're not serious and may lose the deal to a buyer who submits a proper LOI.
Some sellers use "MOU" hoping buyers will be less careful. Always have an M&A attorney review any pre-closing document regardless of what it's called.
Regardless of what the document is called, our M&A attorneys will review it for issues that could cost you. 24-48 hour turnaround.
Request LOI Review →Our M&A attorneys review LOIs, MOUs, and term sheets daily. We'll tell you exactly what document fits your situation-and make sure the terms protect you.
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