For a business owner, signing a letter of intent can feel like crossing the finish line. Months of preparation, marketing, and negotiation have produced a buyer willing to put an offer in writing, and it’s tempting for your client to relax and start planning their exit party.
But the LOI is not the finish line; it is the start of the riskiest phase of the entire transaction. Everything that happens between signing and closing day determines whether your client actually receives the price and terms they thought they had locked in. Advisors who understand this phase well are the ones who keep deals, and client relationships, intact.
A recent article from Exit On Top breaks down what happens in the weeks and months between a signed LOI and a closed deal, covering exclusivity periods, due diligence, purchase agreement negotiation, and working capital adjustments.
Here is what advisors working with business owners approaching a sale need to understand:
The Exclusivity Clause Is a Bet Your Client May Not Realize They’re Making
Most LOIs are non-binding on price and terms but binding on confidentiality and exclusivity. The no-shop clause takes the business off the market for 30 to 90 days, and if the buyer walks after that window, your client starts over in a market that has moved on. Advisors should review this clause before the client signs, push for the shortest reasonable exclusivity period, and treat anything beyond 90 days without clear justification as a negotiating flag.
Due Diligence Rewards Organization and Punishes Delay
Once the LOI is signed, buyers send a due diligence request list covering financials, contracts, and records. Every day a client is slow to respond, the buyer’s anxiety and leverage grow. Advisors add real value here by helping the client designate a point person, organize the data room in advance, and avoid the disorganization that erodes buyer confidence mid-deal.
The Purchase Agreement Is Where Attorneys Earn Their Fee
Representations and warranties, and the indemnification caps that limit post-closing exposure, are where deals most often get contentious. This is not a phase to handle without experienced M&A counsel already engaged. Advisors should confirm legal representation is in place well before due diligence surfaces issues that require negotiation under pressure.
Working Capital and Financing Contingencies Can Quietly Erode Proceeds
Working capital targets are typically based on historical averages, and clients who aggressively collect receivables or draw down inventory before closing can trigger a dollar-for-dollar price reduction without realizing it. Financing contingencies add another layer of risk. Advisors, particularly CPAs, should walk clients through these mechanics early and review draft closing statements before signing day.
No single advisor can catch every issue that surfaces between a signed LOI and a closed deal. That is exactly why the multidisciplinary model matters: a CPA who understands working capital mechanics, an M&A advisor managing the buyer relationship, a wealth planner preparing the client for life after proceeds arrive, and an attorney protecting the client’s exposure in the purchase agreement all need to be coordinated well before the exclusivity clock starts running. This is the collaborative approach XPX was built to support.
Read the full article here: What Happens After You Sign a Letter of Intent to Sell Your Business?
