The General Counsel's Role Before the Letter of Intent

Bringing the General Counsel into an acquisition after the price and structure are socially committed is not early legal involvement.

By that point, management may already feel that the deal is agreed. The board may have heard a compelling strategic story. The counterparty may believe the principal terms are settled. Any legal objection now sounds like an attempt to reopen the business decision.

The GC's most valuable work happens earlier, before a letter of intent turns assumptions into momentum.

Establish who has authority to do what

Early transaction conversations are often informal. A CEO meets a founder. A corporate development leader discusses strategic fit. An investor makes an introduction. A banker tests interest.

The GC should help the team distinguish exploration from commitment.

Who can receive confidential information? Who can discuss a possible valuation range? Which statements require board awareness? If public-company securities or material nonpublic information are involved, do disclosure or trading restrictions apply? Does anyone involved have a conflict? Is the person speaking authorized to represent the company?

This is not bureaucracy. It protects the flexibility that makes early conversations useful.

Test the process, not just the document

A sound transaction process depends on how the decision was reached as well as what the agreement says.

Before an LOI, the GC should understand:

• 01which alternatives the board is considering;
• 02what conflicts may exist;
• 03which directors or investors have special rights or interests;
• 04what approvals may be required;
• 05how management is documenting its recommendation;
• 06whether outside advisers need to be engaged;
• 07what information the board or other decision-makers will need to exercise judgment.

The applicable duties and approvals depend on the entities, jurisdictions and transaction structure. That is precisely why generic assumptions are dangerous.

Outside counsel can advise on law and market practice. The GC makes sure the process fits the company's actual governance, history and decision-making structure.

Shape confidentiality before information begins to move

A nondisclosure agreement is not a ceremonial prelude to diligence.

Before signing one, the company should know what information it expects to share, how competitively sensitive that information is and whether the counterparty presents a commercial risk even if no transaction occurs.

The GC should help determine:

• 01the permitted use of information;
• 02who may receive it;
• 03how long obligations last;
• 04whether residuals language is appropriate;
• 05how compelled disclosure is handled;
• 06whether employee solicitation or standstill provisions matter;
• 07what must be returned or destroyed;
• 08how clean teams or staged disclosure may be used.

The correct answer varies. A strategic competitor evaluating an acquisition presents different concerns from a financial sponsor.

Identify the issues that can change value or structure

Not every legal issue deserves equal attention before an LOI.

The GC should identify the small number capable of changing whether the transaction is viable, how it should be structured or what the buyer can pay.

Examples may include:

• 01ownership of core intellectual property;
• 02change-of-control restrictions;
• 03customer or partner consent requirements;
• 04regulatory approval;
• 05data-use limitations;
• 06employee and equity obligations;
• 07pending or threatened disputes;
• 08sanctions or export-control exposure;
• 09tax or entity complications;
• 10obligations that make integration difficult.

The purpose is not to complete full diligence before agreeing an LOI. It is to prevent both sides from building momentum around a structure that a known issue is likely to break.

Make the LOI reflect the real commercial agreement

Many LOIs are described as largely nonbinding. Certain provisions may nevertheless be binding, and even nonbinding commercial terms create strong expectations.

The GC should ensure the document says what management thinks it says.

Questions include:

• 01Is the price described consistently?
• 02Is consideration cash, stock, assumed debt or some combination?
• 03What happens to options and other equity?
• 04Is working capital treated correctly?
• 05What level of diligence remains?
• 06Is exclusivity justified, and for how long?
• 07What approvals and financing assumptions exist?
• 08Which provisions are intended to bind?
• 09What happens if the process stops?

An LOI should preserve enough room for diligence without disguising a fundamental disagreement as a drafting detail.

Treat exclusivity as something the company is giving away

Exclusivity can create the space required to complete diligence and documentation. It also removes negotiating leverage and may prevent the company from exploring alternatives.

The GC should help the board understand what it receives in return.

Is the buyer prepared to move quickly? Has financing been addressed? Are the principal terms sufficiently developed? What milestones apply? Can exclusivity end if the buyer does not perform?

The legal question cannot be separated from the business question. A beautifully drafted exclusivity provision may still be a poor trade.

Build the diligence plan around decisions

Before the data room expands, the GC can help organize diligence by consequence.

What information could stop the deal? What could change price or structure? What will require third-party action? What must remain tightly controlled? Which workstreams depend on each other?

This produces a better process than opening every folder and asking every adviser to report every imperfection.

The GC should also agree escalation rules. A minor issue should not flood the executive team. A material issue should not sit in a workstream because nobody owns the decision it creates.

Keep the board informed without turning it into the deal team

Boards need enough information to exercise oversight and approve matters reserved to them. They do not need to negotiate every drafting point.

The GC can help management bring the board the right questions at the right time:

• 01Why this transaction rather than the alternatives?
• 02What assumptions drive value?
• 03What are the principal execution risks?
• 04What conflicts exist?
• 05What remains unresolved?
• 06What would cause management to stop?

Useful board materials show the remaining uncertainty and how management is dealing with it.

The GC is not the department of no

The lazy caricature is that business leaders create value and lawyers constrain them.

In a transaction, the GC creates value by protecting decision quality. The GC makes sure the company knows when it is exploring, when it is committing, what it is giving away and which assumptions remain untested.

That work is most effective before momentum becomes a substitute for judgment.

Open Future Forum already convenes General Counsel, CFOs and private equity leaders in separate peer settings. A useful cross-functional deal discussion would not ask GCs to provide free legal advice or discuss live matters. It would examine where earlier legal involvement changes a commercial outcome and where process problems become deal problems.

This article provides general business commentary, not legal advice.

Last updated: September 2, 2026