Marketing Agency M&A Blog

Agency Letter of Intent (LOI): What Sellers Need to Know

Andy Day
March 22, 2026
3 min read
Agency Letter of Intent (LOI): What Sellers Need to Know

A Letter of Intent (LOI) is the document that turns a conversation into a deal. It's a written proposal from a buyer outlining the key terms under which they intend to acquire your agency. Understanding what's in it, what's negotiable, and what to watch out for is critical.

What an Agency LOI Contains

1. Purchase Price and Structure

The headline number and its components: cash at close, earn-out, seller note, and any equity rollover. Push for maximum cash at close — every pound moved from earn-out to upfront cash reduces your risk.

2. Deal Type

Asset purchase (most common for agencies under £10M) or stock/equity purchase. Affects taxes, liability transfer, and contract handling.

3. Due Diligence Period

Typically 45–90 days. Shorter is better for sellers — 60 days is reasonable. Push back on anything beyond 90.

4. Exclusivity (No-Shop) Clause

Usually the only binding term. Prevents you from negotiating with other buyers during due diligence. Keep it as short as possible and consider negotiating a break fee if the buyer walks.

5. Key Conditions

Financing contingencies, client retention requirements, employee retention, landlord consent. Fewer conditions = more certainty. Push to remove financing contingencies.

6. Transition Terms

Duration (12–24 months typical), your role, compensation, and working hours. Be specific about responsibilities to avoid disputes.

7. Non-Compete Terms

Duration (2–5 years, 3 most common), geographic scope, and carve-outs for advisory, investing, and speaking.

Binding vs. Non-Binding

Binding: Exclusivity/no-shop, confidentiality, expense allocation, governing law.

Non-binding: Purchase price, deal structure, earn-out terms, transition terms, closing conditions.

While non-binding terms can technically change, the LOI sets expectations. Re-trading damages trust and kills deals. Get terms as close to ideal as possible now.

How to Evaluate Competing LOIs

If running a competitive process, compare LOIs across: total consideration, cash percentage, earn-out terms and metrics, transition period, due diligence length, and financing contingencies.

Don't just compare numbers. Also evaluate buyer track record, cultural fit, strategic value, and earn-out achievability.

Red Flags in an LOI

  1. Financing contingency without proof of funds — Request evidence of funding before signing exclusivity
  2. Unusually long exclusivity — More than 90 days benefits only the buyer
  3. Vague earn-out metrics — Insist on clearly defined, independently auditable metrics
  4. No break fee — A break fee (1–3% of deal value) compensates if the buyer walks
  5. Excessive conditions — Every condition is a potential exit for the buyer
  6. Re-trading signals — "We'll improve terms after diligence" usually means they won't

What to Do When You Receive an LOI

  1. Don't sign immediately — take 5–7 business days
  2. Engage your M&A advisor
  3. Have your M&A attorney review binding terms
  4. Counter-propose on terms that don't work
  5. Get comfortable with the buyer — this starts a 6–12 month relationship

Get Expert Guidance

Use our free valuation tool to understand your agency's worth before entering negotiations. Connect with our advisory team to ensure you're positioned for the best outcome.

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