What an M&A Letter of Intent Does — and Does Not — Bind

A letter of intent (LOI) structures the early stage of an M&A transaction. It commonly records the proposed structure, an indicative price or formula, the timetable and the conditions for moving forward. There is no universal rule that an LOI is entirely binding or entirely non-binding: its effect depends on the wording, each clause and the parties' conduct.

Indicative terms and binding clauses

Price, deal structure and the intention to negotiate are often made subject to due diligence, corporate approvals and definitive agreements. Other provisions are commonly intended to apply immediately:

• confidentiality and permitted use of information;
• exclusivity for a defined period;
• allocation of adviser costs and process expenses;
• governing law, jurisdiction and notices;
• return or destruction of information if the transaction stops.

Spanish contract law recognises freedom of contract within legal limits and requires agreements to be performed according to their terms and good faith. A document therefore needs a clause-by-clause review; a general “non-binding” heading may not neutralise inconsistent obligations elsewhere.

Pre-signing checklist

1. State expressly which provisions bind and which depend on definitive agreements.
2. Define whether the contemplated transaction concerns shares, assets or another structure.
3. Explain whether price is indicative and which debt, cash or working-capital adjustments may apply.
4. List conditions such as satisfactory due diligence, financing and corporate or regulatory approvals.
5. Limit exclusivity by duration, scope, exceptions and agreed consequences.
6. Align the LOI with the NDA and control access to the data room.
7. Set an expiry date and identify provisions that survive termination.

Practical example

An LOI quoting €4 million “subject to debt, cash, working capital and due diligence” does not, by that wording alone, establish a final price. If it also imposes a binding 60-day exclusivity period, negotiating with another buyer during that period may create a contractual dispute.

NRRO's legal scope

NRRO advises when the transaction and parties are already identified: reviewing the LOI, coordinating legal due diligence and preparing transaction documents. Buyer searches, financial valuation and commercial intermediation are outside that legal scope.

Official sources

• Spanish Civil Code, particularly articles 1091 and 1254–1258.
• Law 1/2019 on Trade Secrets.

Legal review: 26 August 2026. This is general information; an LOI must be assessed from its wording and the specific transaction.