What is a letter of intent, and what should you review before signing?

A letter of intent, or LOI, documents a proposed acquisition before definitive agreements are negotiated. It should not be confused with closing or interpreted by its title alone. This guide is general information, not legal advice.

Separate proposals from obligations

An LOI may combine proposed terms with obligations concerning confidentiality, exclusivity, or other matters. Its effect depends on the wording and applicable law: do not assume that everything is binding, or that nothing is.

As a general reference, BDC's explanation of letters of intent, available in French, describes their role in an acquisition. It does not replace review by your lawyer in Panama.

What to clarify

Ask your advisors to review:

• What would be purchased: shares, assets, or another defined scope.
• The price or calculation method and its underlying assumptions.
• Payments at closing, deferred payments, and conditional amounts.
• Outstanding review, approvals, and required financing.
• The timetable, expenses, and each party's rights if the process ends.

Also clarify the treatment of debt, cash, and working capital before comparing the proposal with other offers.

Review exclusivity

If exclusivity is proposed, understand which activities it limits, how long it lasts, and how it would end or be extended. Agree on milestones for reviewing progress. No single number of days suits every transaction.

Prepare for the next step

Detailed review and contract negotiations may confirm or change the initial proposal. Keep a list of open matters, and avoid communicating a sale as completed before checking its status with your advisors.

Read our sale preparation guide. To understand Santa Maria Ventures' approach as a potential buyer, start a confidential conversation, with no cost or obligation.