For many owners, signing a letter of intent feels like the finish line. A buyer has named a price, the terms look reasonable and closing seems like a formality. In reality, the LOI marks the start of a fragile stretch of the deal. Due diligence, financing, legal drafting and working capital negotiations all happen in the weeks that follow, and any of them can stall or end a transaction.
Understanding where deals break down helps sellers prepare long before a buyer ever sees the numbers.
What Happens After the LOI
Letters of intent are often nonbinding on price and terms, but they may include an exclusivity period, sometimes 60 to 90 days, during which the seller agrees not to negotiate with anyone else. The exact terms and legal effect depend on the agreement. Exclusivity can shift leverage toward the buyer. If problems surface during diligence, the seller may have fewer options and less time to respond.
During this period, the buyer’s accountants, attorneys and lenders work through the company’s financials, contracts, tax filings, employee matters and operations. Their job is to confirm that the business they agreed to buy is the business that actually exists.
Reasons Deals Can Fail
Financials That Don’t Hold Up
One potential deal killer is a gap between the numbers presented and the numbers found. Add-backs that can’t be documented, revenue recognized inconsistently or personal expenses mixed into the business can erode buyer confidence. When a quality of earnings review finds lower earnings than expected, the buyer may renegotiate the price or walk away.
Customer or Owner Concentration
A business where one customer accounts for a large share of revenue, or where the owner holds every key relationship, looks risky. Buyers worry that revenue will leave when the owner does. This concern often surfaces late, once buyers start reviewing contracts and speaking with key accounts.
Financing Problems
Many buyers rely on bank or SBA financing. Lenders run their own review, and if the company’s cash flow doesn’t comfortably support the debt, the deal can stall even when buyer and seller agree on everything else.
Legal and Compliance Surprises
Contracts that can’t be assigned, expired licenses, pending litigation, unclear ownership of intellectual property or misclassified workers can all delay closing. Some issues are easy to fix. Others change the risk picture enough to reopen negotiations.
Seller Fatigue
Diligence is exhausting. Requests pile up while the owner still has to run the company. When performance slips during the process, buyers notice, and a weak month can become the basis for a lower offer.
How Sellers Can Get Ready
Clean Up the Books Early
Sellers who commission their own quality of earnings review, or at least have reviewed financial statements before going to market, can find problems on their own schedule. Documenting add-backs and separating personal expenses a year or more before a sale can reduce the risk of disputes that lead buyers to renegotiate.
Reduce Dependence on the Owner
Delegating key relationships, documenting processes and building a management team that can run the business make it easier for a buyer to picture the company without its founder. That can lower perceived risk and support value.
Organize Documents Before Signing
Gathering contracts, leases, licenses, tax returns, employee agreements and insurance policies before the LOI is signed can help shorten diligence and signal that the business is well run. Slow, disorganized responses make buyers wonder what else they might find.
Keep the Business Performing
Owners should plan for the time diligence takes and lean on their team so results don’t slip during the sale. Strong recent months are one of the best defenses against a last-minute price cut.
The Role of an Advisor
Experienced representation helps at every stage. A merger and acquisitions advisor can prepare the company for diligence, vet buyers for financial capacity before granting exclusivity, keep multiple parties engaged as long as possible and manage the flow of information so the owner can focus on running the business. Advisors also know which diligence issues are routine and which signal that a buyer is preparing to renegotiate. They work alongside the seller’s attorney and CPA rather than replacing them.
Closing the Gap Between LOI and Close
A signed letter of intent is an important milestone, but it isn’t a sale. The owners who reach closing at the price they expected tend to be the ones who prepared before the buyer arrived, with clean financials, documented operations, a company that doesn’t depend on them alone and a team that keeps performing while the deal gets done.
