What Happens After You Sign the Letter of Intent

A letter of intent is typically three to six pages. It sets out the agreed price and structure, the conditions under which the deal can proceed, and the timeline for completing due diligence and moving to a signed purchase agreement. Most LOIs provide the buyer with an exclusivity window, usually sixty to ninety days, during which the seller cannot engage other buyers.

Most LOI terms are non-binding, which means either party can walk away if due diligence reveals material issues. The exclusivity clause is typically binding, which means accepting an LOI is a real commitment. You are agreeing to focus the next several months on this process with this buyer.

Before signing, review every term carefully with your attorney. Price adjustments tied to working capital, earnout provisions, seller financing requirements, and representations and warranties insurance expectations are common areas where the initial LOI does not reflect the full picture of what the buyer has in mind.

Once the LOI is signed, the buyer begins formal due diligence. This is a structured, comprehensive review of every material aspect of the business, covering financial, legal, operational, commercial, and sometimes environmental considerations depending on the industry.

The buyer will submit a due diligence request list, typically a multi-page document asking for three to five years of financial statements, customer contracts, employee agreements, lease documentation, tax returns, intellectual property records, and more. Organizing and responding to this request list is significant work, and how cleanly you respond has a direct effect on buyer confidence.

The due diligence period is also when buyers bring in outside advisors, accountants for a quality of earnings review, attorneys for legal diligence, and operational consultants if the industry warrants it. Each of these advisors has their own questions and requests. Having a well-organized data room and a single point of contact managing the process keeps things moving efficiently.

Diligence findings rarely result in a clean confirmation of every term in the LOI. More often, the buyer's team surfaces questions, concerns, or issues that require a response. How you handle these findings determines whether the deal closes at the original terms, closes with adjustments, or does not close at all.

The most common outcomes: minor findings are resolved through document clarification or management explanation with no impact on price. Material findings that are genuine surprises may lead to price adjustments, earnout provisions, or increased representations and warranties in the purchase agreement. Findings that reveal fundamental misrepresentation of the business's condition typically terminate the deal.

Owners who have prepared thoroughly for diligence experience fewer surprises in this phase. The issues buyers discover should, as much as possible, be issues you already know about and have a prepared response to, not revelations.

As diligence concludes, the parties' attorneys negotiate the final purchase agreement. This is the binding document that governs every aspect of the transaction and protects both parties after closing. The negotiation covers representations and warranties, indemnification provisions, closing conditions, and the mechanics of the actual transfer.

Purchase agreement negotiation is where many deals slow down. Both parties have real leverage at this stage and real interests to protect. Having an experienced attorney is not optional. This document will govern obligations and potential liability for years after the deal closes.

Once the purchase agreement is signed, the transaction moves to a coordinated closing process: final lender confirmations, document execution, wire transfers, and the formal transfer of ownership. For most lower middle market transactions, the time from signed LOI to closing is sixty to ninety days. Well-prepared sellers with clean data rooms consistently move through this process faster.