--- title: "Non-Binding LOI? That's Not a Free Pass | Perspectives" description: "Alex Lubyansky on why a non-binding LOI still sets the terms both sides fight over later, and why the headline number is not the deal." canonical: "https://acquisitionstars.com/perspectives/non-binding-loi-is-not-a-free-pass" author: "Alex Lubyansky" firm: "Acquisition Stars" practice: "M&A and securities law" office: "Novi, Michigan (serves clients nationwide)" contact: "consult@acquisitionstars.com | 248-266-2790" --- # Non-Binding LOI? That's Not a Free Pass Perspectives Alex Lubyansky · Managing Partner, Acquisition Stars · September 3, 2026 Direct Answer Non-binding is a phrase, not a guarantee. In my experience, whatever gets codified in a Letter of Intent, price, structure, a working capital target, becomes the reference point both sides anchor to for the rest of the deal, regardless of what the document's title says. Treating the LOI stage as low-stakes because the word 'non-binding' appears on the page is the mistake that causes the expensive fights later. ## The Title of a Document Does Not Tell You What It Does One of the first things you learn in legal training is that the title of a document is not indicative of the substance of the document. A Letter of Intent can call itself non-binding on the first page and still commit both sides to a price, a structure, and a set of tactical concessions that carry through the rest of the transaction. From a legal perspective, the LOI is one of the largest entry points where counsel can add real value, precisely because most buyers and sellers assume it is a low-stakes document. It rarely is. > "The LOI is an excellent entry point. From a legal perspective, it's one of the largest moments where an attorney can add real value. If something gets codified in an LOI, it's often far more dangerous and binding than the buyer believes. People look at the title of an LOI on Google and assume non-binding means harmless. The first thing you learn in legal training is that the title of a document is not indicative of its substance." Even setting aside how a non-binding label might play out in arbitration or litigation, the practical reality is simpler and more immediate: once a term is on the page, it becomes hard to move. Buyers and sellers who draft an LOI without outside help often do not realize they are attaching themselves to a price or a structure they will not be able to renegotiate later without real friction. ## Why Parties Anchor to the LOI, Even the Non-Binding Kind In my experience, both sides anchor to whatever the LOI says, regardless of who drafted it and regardless of whether outside counsel was involved in the negotiation. If a deal blows up later and the parties start pointing fingers, the LOI's terms are almost always where the argument starts. That is what "non-binding" actually means in practice: it describes the document's legal label, not what will happen when the deal gets difficult. > "Non-binding is just a phrase. It does not guarantee a frictionless process down the line. An LOI can absolutely structure the entire future of a deal even when the document explicitly says non-binding. If counsel comes in later in the game, the LOI is already there, and parties will anchor to it. Whether or not you were involved in the drafting. Whether or not you were involved in the negotiation. They will anchor to that document. And when deals blow up, fingers get pointed at the LOI's terms." This is why I tell clients the phrase "non-binding" sets expectations, while the substance of the document sets the deal. Those are two different things, and the gap between them is where a transaction gets expensive. ## Pre-LOI Is an Underused Point to Bring in Counsel Many buyers wait to engage an attorney until the asset purchase agreement or stock purchase agreement stage, treating the LOI as something they can negotiate on their own and clean up later with counsel's help. I understand the instinct. It can feel too early in the process to bring in a lawyer when there is not yet a signed document. But it is not contradictory to say a deal is too early for an attorney and also say counsel is needed as early as possible. It just requires clarity about what pre-LOI engagement actually looks like, which does not have to mean a full-scale, expensive commitment before there is even a deal to protect. A well-drafted LOI typically includes contingency language that survives even a non-binding designation: an escrow-tied structure for funds, a due-diligence contingency window, a financing contingency, and carve-outs for confidentiality, expenses, and governing law. Getting those provisions right before signing is far less costly, and far less disruptive to the relationship, than trying to renegotiate them after the other side has already anchored to a weaker version. ## The Headline Number Is Not the Deal Sellers in particular tend to chase the number that will generate the best press, the one they can repeat when someone asks what they sold the business for. I try to set clients up to evaluate what they will actually receive at the end, after tax and after every provision in the deal plays out, not the number on the cover page. > "You're not looking for the headline number that's going to generate good press. You're looking for the right structure, the right deal." It might not be the highest number offered on paper. It might still be the correct deal, and the clearer path to actually recovering the value the seller thinks they are getting. That distinction gets decided at the LOI stage, not after, because the LOI is where the structure gets set. ## The Working Capital Peg: A Concrete Example The working capital target is a good illustration of everything above. It is usually a single line in the LOI, easy to skim past, and it looks like boilerplate. In practice, it is often the most expensive footnote in the document. Sellers agree to a working capital target without fully grasping what that number means in dollar terms, and later, when the real calculation lands at closing, it can turn out to be a far larger holdback than they expected. That gap between what a seller thought they agreed to and what the number actually means is a recurring, avoidable source of deal fatigue and post-signing disputes, and it traces directly back to how the LOI was negotiated. ## If You Are the Buyer Bring counsel in before the LOI is drafted, not after it is signed. Once a price, a structure, or a working capital target is on the page, you have effectively attached yourself to it. Renegotiating a term you already agreed to, even in a non-binding document, is harder and more expensive than getting it right the first time. ## If You Are the Seller Do not let the headline number substitute for understanding the structure behind it. Ask what you will actually receive after tax, after any earnout or holdback, and after the working capital adjustment plays out. A slightly lower offer with a clear, well-understood structure is frequently the better outcome than a higher number attached to terms you do not fully understand yet. ## Where the Standard Guide Differs Our guide on [LOI vs. purchase agreement terms](https://acquisitionstars.com/blog/loi-vs-purchase-agreement) walks through the mechanics of what typically binds you in an LOI and what does not, clause by clause. This page is different: it is my own view on why the mechanics checklist is not enough on its own. Knowing which clauses are technically binding does not protect you from anchoring to a number or a structure you agreed to before you understood it. The mechanics guide tells you what the document does. This page is about why treating the LOI stage as low-stakes is the actual mistake, independent of which specific clauses are binding. ### Drafting or Reviewing an LOI? Anchoring happens fast once a term is on the page. Our [mergers and acquisitions practice](https://acquisitionstars.com/services/mergers-acquisitions) reviews and negotiates LOIs before they are signed, not after the terms are already set. ### Request Engagement Assessment Tell us about your transaction. We review every submission and respond within one business day. ## Frequently Asked Questions ### If an LOI is labeled non-binding, can I walk away from its terms later? The label affects what a court can enforce, not what the other side will expect. In my experience, once a number or a structure is written into an LOI, both parties anchor to it, whoever drafted it. Walking back from an agreed term later, even a non-binding one, creates friction and can stall or kill the deal. ### Should a buyer get an attorney involved before signing the LOI? I think pre-LOI is one of the best points to bring in counsel, and it is underused. Many buyers wait until the purchase agreement stage. By then, the price, the structure, and other tactical points are often already locked in by what the LOI says. ### What is the working capital peg, and why does it matter at the LOI stage? It is the target level of working capital a seller agrees to deliver at closing, and it is usually a single line in the LOI. In my experience, sellers often agree to a number without fully understanding what it means in practice, and the real calculation later turns out to be a much larger adjustment than expected. ### Is the highest headline offer always the best deal? Not in my experience. I tell clients to look at the structure and what they will actually receive after tax and after every provision plays out, not the number that generates the best press. A lower offer with a clean, well-understood structure is often the more reliable outcome. ### LOI vs. Purchase Agreement What actually binds you at each stage of the deal. ### 7 LOI Clauses Sellers Regret The specific clauses that cost sellers the most. ### Perspectives Alex Lubyansky's own view on how deals actually work. --- Source: https://acquisitionstars.com/perspectives/non-binding-loi-is-not-a-free-pass Markdown version generated for machine readers. Canonical HTML at the source URL.