LOI, term sheet and exclusivity in an app sale: what they mean and what to sign

Indicative offer, LOI, term sheet: what’s the difference?

Mostly the name and the level of detail:

• Indicative offer: a price or a range with the main terms, usually in an email, before the buyer has checked your accounts.
• Letter of intent (LOI): a short document that sets out the deal both sides intend to sign, with a date for closing and, often, an exclusivity period.
• Term sheet: the same idea as a list of terms rather than a letter. Some buyers use the two words for the same thing.

All three come before due diligence and the app purchase agreement, which is the document that actually sells the app.

Is an LOI binding?

Usually not on the main question: neither side is obliged to buy or sell at that price. That is what gives the buyer room to check your accounts, and you room to walk away if the terms change.

But LOIs often have a few clauses that are meant to bind both sides from the day you sign:

• Confidentiality: the buyer keeps your numbers private, whether or not the deal happens.
• Exclusivity: you don’t negotiate with other buyers for a set time.
• Costs: who pays for what if the deal doesn’t close.

A good LOI says in so many words which parts are binding and which aren’t. If yours doesn’t, ask for that sentence before you sign.

What should the LOI say?

The payment line matters most. A higher price with a large earn-out can leave you with less at closing than a lower all-cash offer; see how to compare offers.

What does exclusivity mean for me?

For the agreed period you stop negotiating with, or taking offers from, other buyers. The buyer asks for it because they’re about to spend time and money checking your app, and don’t want to be outbid halfway.

It’s reasonable, but it has a cost for you: while it runs, the other offers go cold. On Acquire.com, for example, a listing becomes uncontactable once the seller accepts an LOI (Acquire.com). So sign it last, after you’ve compared offers and picked one, not to get a first number.

How long should exclusivity last?

Only as long as the checks really take. Published guides put the usual range at 30 to 45 days (Mintz) or 30 to 60 days (Acquire.com), and Acquire.com adds that for deals under $1 million long periods usually aren’t necessary. For a small app with clean accounts, the checks take days to a couple of weeks, so that’s a fair length to agree; anything longer should come with a reason. Three things protect you:

• A start that depends on proof. Exclusivity begins once the buyer has shown proof of funds, not when you sign.
• An end date that doesn’t depend on anyone doing anything.
• Milestones. If the buyer misses an agreed date (checks finished, draft agreement sent), exclusivity ends on its own.
• An early exit if the buyer lowers the price or changes the payment terms.
• No automatic renewal. If more time is needed, you agree to it again, in writing.

Can the price change after the LOI?

It can, which is why the LOI should say what could change it. A fair version: the price holds unless due diligence finds something different from what you told the buyer. A price cut near the end of exclusivity, with no new finding behind it, is a known tactic; if the numbers are what you said they were, you can say no and go back to your other buyers once exclusivity ends. More on this in why app deals fall through.

Do small app sales need an LOI at all?

Not always. On a small, simple deal, a clear written offer by email can do the same job: price, payment, what’s included, what the buyer still wants to check and when you’d close. What matters is that the terms are in writing before you share everything and before you stop talking to other buyers, whatever the document is called.

How does it work when you sell to me?

There’s no separate LOI step. If the app fits, I send a written offer within a few days: a price range, how it’s paid, what’s included and the timeline. The final number comes after a short check of the accounts, and it stays in that range unless something there is different from what we discussed. Then we sign a short purchase agreement, the money goes into Escrow.com (I pay the escrow fee), and you start the App Store transfer.

Payment is in full, in cash, at closing, with no instalments and no earn-out, so there’s no payment clause to decode. A deal typically closes about 14 days after the first message, everything included. Send me your app.