The LOI is not the finish line
After exclusivity, diligence and documentation determine whether value survives.
Signing a letter of intent feels like progress. It is better understood as the start of the transaction’s most demanding phase.
The buyer now tests the assumptions behind its proposal. Financial diligence examines earnings, working capital, debt-like items, forecasts, and accounting policies. Legal diligence reviews contracts, corporate records, employees, litigation, intellectual property, compliance, and other obligations. Tax, insurance, technology, environmental, and commercial workstreams may follow.
At the same time, the parties negotiate definitive documents and seek internal approvals, financing, consents, or regulatory clearance. Management must answer detailed requests while continuing to run the company and meet the forecast on which value may depend.
Exclusivity changes leverage because the seller has usually stopped speaking with alternatives. Execution discipline therefore matters. Establish a request tracker, assign owners, maintain one approved source of information, hold regular workstream calls, and escalate questions that could affect value or timing. Require the buyer to meet its own milestones for document drafts, financing, and approvals.
Watch for scope drift. New questions are normal; repeated requests, expanding analyses, and delayed decisions may signal internal uncertainty or position the buyer for a retrade. The response should be factual and organized, not defensive.
A letter of intent (LOI) describes an intended transaction. Only executed definitive documents, satisfied or waived closing conditions, and a funded closing turn that intention into a completed sale.