Letter of Intent for Selling a Business: What to Read First

What does the proposed deal include, and when is the price paid?

The Blüm LOI states a $2 million purchase-price floor. Its proposed consideration includes $1.3 million in cash, a $500,000 note assignment, and $500,000 of stock subject to a 12-month holdback. The document also includes a working-capital adjustment and performance-based awards.

That mix makes the headline figure an incomplete description of the proposal. Cash, an assigned note, held-back stock, and performance-based awards are different forms of consideration. The working-capital adjustment is another part of the stated economics. The purchase-price floor alone therefore doesn’t tell you what would be available at closing or what would remain subject to another event or condition.

The two $800,000 provisions sharpen that issue. The closing provision associates one payment event with closing. The later provision associates an $800,000 release with execution of both the LOI and the management-services agreement. The relevant verbs—“wired” and “released”—sit beside different triggers. That is why the figures can’t simply be collected into a payment schedule that the document itself doesn’t provide.

The management-services agreement also places an operational event alongside the proposed acquisition. In this particular filing, execution of that agreement is connected to immediate operational and economic control. If you focused only on the eventual purchase agreement, you could miss a consequence attached to signing a different document.

Blüm is an unusual public-company record involving public stock, an existing secured note, redactions, performance terms, and a management-services agreement. It isn’t a model for a private-company transaction. What it reveals is a reading problem that can arise in any real LOI: the stated value of a proposal may be spread across different forms, events, conditions, and documents.

A preliminary price can also coexist with important work that hasn’t been completed. The CHNR filed LOI gives an estimated range composed of consideration shares and cash, while leaving an independent valuation report, approvals, diligence, and definitive agreements ahead. The range describes the proposal, but it doesn’t mean the transaction’s valuation work and approvals are finished.

The Nightfood filed LOI likewise describes share consideration and earnout mechanics while reserving material details for later agreements. For the seller, that distinction affects how much certainty the preliminary document actually provides. An LOI may identify the intended structure without yet containing all the terms that will govern it.

These filings involve transaction-specific public-company circumstances, so their figures and structures aren’t evidence of customary or advisable private-company terms. The useful judgment is narrower: a proposed price becomes intelligible only when you can connect each form of consideration to its stated event, condition, and governing document.

That may lead to a broader comparison of the offer’s economics, certainty, exposure, and obligations through the complete deal terms. Held-back stock or performance-based consideration may also need separate attention alongside other forms of contingent or deferred consideration. Where the LOI includes a working-capital adjustment, the proposal may raise a separate question about its working-capital target.

Once the economics are visible, the next issue is what signing itself may begin.

Is a letter of intent binding when selling a business?

An LOI can describe a proposed acquisition as nonbinding while expressly identifying selected provisions as binding. The answer therefore depends on the document’s specific language, not only the label applied to the transaction as a whole.

The CHNR LOI makes that division explicit. It describes the acquisition as nonbinding but identifies its due-diligence, cost, exclusivity, confidentiality, and governing-law provisions as binding. The proposed acquisition could remain subject to valuation, approvals, diligence, and final documentation while those named provisions occupied a different position in the same record.

Nightfood draws a similar line using its own terms. Its LOI characterizes most provisions as nonbinding expressions of current intent while identifying due-diligence access, confidentiality, exclusivity, expenses, governing law, dispute resolution, and the binding-provisions section as legally binding. It separately states that there is no obligation to close until definitive agreements have been executed and the closing conditions have been satisfied or waived.

Blüm’s amended LOI uses a different formulation: it calls itself binding. That difference is a reason to stay with the language of the document in front of you. One filed LOI’s structure doesn’t determine how another LOI operates.

For your signing decision, the important distinction is between the proposed sale and the provisions the document identifies as having present force. A sale may still depend on diligence, approvals, later agreements, and closing conditions even though the LOI expressly designates exclusivity, confidentiality, access, expenses, or another provision as binding.

What those designations mean for your LOI—and whether a particular provision is enforceable—requires qualified counsel to consider the complete document set, governing law, and transaction facts. The filings establish only what their own language says. They don’t supply a universal answer for another seller.

We think the practical question is whether you understand what the buyer still has to complete while the LOI says your choices are restricted. That brings the document’s separate post-signing clocks into the same decision.

What happens after signing: diligence, exclusivity, and definitive agreements

Signing may start an exclusivity period while diligence, approvals, final documentation, and closing conditions remain open. Those processes don’t necessarily share one endpoint. The consequence for a seller depends on how the document’s specific dates and events fit together.

CHNR places substantial unfinished work beside a restriction beginning at signature. Its LOI leaves an independent valuation report, special-committee approval, possible shareholder approval, listing approval, diligence, and definitive agreements ahead. At the same time, it identifies exclusivity as binding from signing through June 30, 2026, unless the parties extend that period in writing.

The seller’s alternatives were therefore subject to a stated exclusivity period while several transaction steps remained open. The filing doesn’t establish whether those steps were completed or whether the acquisition closed. It does make the overlap visible: the restriction had a defined start and endpoint even though the proposed transaction still depended on buyer work, approvals, and later documentation.

Nightfood presents a more complicated set of clocks. Its LOI states a 90-day diligence period, a six-month outside date for definitive agreements, and a 180-day exclusivity period. A separate uplisting condition could remain open for as long as 24 months. The document also says that no obligation to close arises until definitive agreements are executed and closing conditions are satisfied or waived.

Those periods describe different parts of the process. The diligence period doesn’t resolve the definitive-agreement deadline, and the exclusivity period doesn’t determine when the uplisting condition will be satisfied. A condition with a longer window may remain open after other stated periods have ended.

Neither filing establishes a customary or suitable timeline for your sale. Their dates show why we would compare the restriction on your alternatives with the work the buyer and other parties still need to complete. If exclusivity is running while valuation, diligence, approvals, or closing conditions remain unresolved, that overlap belongs at the center of the signing decision—not in a footnote to the proposed price.

The Blüm LOI adds another possibility. Its execution-triggered provision connects the LOI and management-services agreement with immediate operational and economic control, while its acquisition remains organized around a later closing. Whatever those provisions ultimately mean within the complete record, the sequence shows that the period before closing may include a consequential operational arrangement rather than only preparation for a future sale.

A later definitive agreement must then be read for its own express terms and its relationship to the preliminary documents. It shouldn’t be treated as a guaranteed restatement of the LOI. The Delaware Supreme Court’s 2014 ev3 opinion concerned an LOI containing provisions expressly designated as binding and others designated as nonbinding, followed by a merger agreement. On that record, the court held that the later agreement’s integration language didn’t transform a nonbinding funding provision into a binding obligation, and that the provision couldn’t override the definitive agreement’s express terms.

That was a document-specific result involving particular language, governing law, and a developed litigation record—not a rule that resolves another seller’s LOI. It gives the counsel review a concrete purpose, however: the signed LOI, incorporated materials, amendments, and any later definitive agreement need to be considered as their own connected record.

Before you accept exclusivity or another present restriction, the proposal should be clear enough for you and qualified counsel to understand the payment events, open conditions, competing clocks, and provisions the documents identify as binding or surviving. We wouldn’t treat that review as paperwork after the price has been agreed. It is how you determine what signing changes now while the sale itself remains unfinished.