Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Letter of Intent

What it is:

A letter of intent is a non-binding document detailing a planned action on the part of an organization or individual.

How it works (Example):

A letter of intent is often drafted by companies in relation to a deal or transaction with another company, such as a merger. It is meant to summarize, in a non-binding manner, a company's intended action and the envisioned steps required to carry out the action. A letter of intent may precede a formal binding agreement as a preliminary plan of action and expression of interest. For instance, a company might issue a letter of intent to another company as a serious proposal of a deal or partnership.

Why it Matters:

Mergers and other business transactions can be complex and take years to execute. Letters of intent, though not legally binding, can add clarity to the process by providing the key points of a transaction. They also provide investors with tangible proof and information about the potential business transaction.

Related Terms View All
  • Natural Capital
    Let's say Company XYZ is a paper manufacturer. It owns 50,000 acres of forestland in...
  • Saturday Night Special
    Let's assume Company XYZ wants to purchase the common shares of Company 123. To...
  • Canada Learning Bond
    In general, under the program, the Canadian government gives families $500 in the form of...
  • Goldbrick Shares
    For example, let's assume that Company XYZ is a tech company with growing revenues but...
  • Nakahara Prize
    The board of directors of the Japanese Economic Association determines who wins the...