From LOI to Close: What Happens After You Sign

A signed letter of intent feels like the finish line. In practice it is the starting gun for the hardest stretch of the sale. Between the LOI and the wire, the buyer confirms everything it assumed, the lawyers turn a short agreement into a long one, and third parties who were never in the room get a vote.

The LOI to close window usually runs 60 to 120 days, and most of that time is not spent negotiating price. It goes to verification, documentation, and consent. Deals that die in this window rarely die over value. They die over a discovery the buyer did not expect, a consent that never arrived, or a seller who treated exclusivity as a pause instead of a countdown.

This guide walks through what happens between signing and closing, where the risk sits, and what sellers can do to keep the process moving.

The LOI Is a Map, Not a Guarantee

A letter of intent is mostly non-binding. It sets the headline price, the structure, the exclusivity period, and the main closing conditions. It does not obligate the buyer to close. The binding parts are usually confidentiality, exclusivity, and any break fee or expense provision.

That distinction matters. A seller can sign an LOI at a good price and still watch the deal re-trade in diligence. The LOI is a framework for the work ahead. The purchase agreement is the document that actually governs the deal.

Sellers should read the LOI as a preview of the buyer's diligence plan. Every assumption in it, from the EBITDA definition to the working capital peg to the customer retention story, becomes a diligence workstream.

An LOI is a plan for the process, not a promise to close. The seller's leverage is highest before exclusivity and declines with every week that follows.

The Exclusive Period Is a Countdown

Exclusivity gives one buyer the right to negotiate without competition for a set period, often 60 to 90 days. It also removes the seller's leverage. Once exclusivity starts, the buyer knows there is no competing bid and the seller has given up the market.

Two rules keep exclusivity healthy:

• Keep the window short. A period long enough to do the work is enough. Extensions should be earned, not automatic.
• Define what ends it. A missed milestone, a failure to deliver diligence materials, or an unreasonable price change should let the seller reopen the process.

A buyer who asks for a long, open-ended exclusivity period before diligence has even started is asking the seller to carry the risk of the buyer's own uncertainty.

Confirmatory Due Diligence

The buyer's diligence is confirmatory. The buyer already formed a view at the LOI stage and now needs to verify it. The work is deep and mostly financial, legal, tax, and operational.

| Workstream | What the buyer tests | Who usually drives it | | --- | --- | --- | | Financial | Quality of earnings, working capital, add-backs, customer and job profitability | Buyer's accounting firm | | Legal | Contracts, change-of-control clauses, litigation, IP, corporate records | Buyer's counsel | | Tax | Structure, exposure, state filings, payroll classification | Buyer's tax advisor | | Commercial | Customer concentration, pipeline, pricing, market durability | Buyer or a market consultant | | Operational | People, systems, capacity, licenses, safety, insurance | Buyer's operating team | | Environmental and regulatory | Permits, compliance, contamination, facility risk | Third-party consultants |

Sellers should expect a data room request list, management calls, a site visit, and interviews with key employees and sometimes customers. The quality of the data room matters. A clean, indexed, well-organized room compresses the timeline and reduces surprises. A messy one invites more questions and more delay.

The Purchase Agreement and the Negotiation That Follows

Diligence findings feed directly into the purchase agreement. This is where the LOI's headlines become enforceable terms.

The sections a seller will negotiate:

• Purchase price mechanics. The peg, the closing adjustment, and how the final number is calculated.
• Representations and warranties. The seller's statements about the business, and the qualifications that limit them.
• Indemnification. Who pays if a representation is wrong, for how long, and against what cap.
• Escrow and holdback. How much of the price is held back and for how long.
• Closing conditions. What must be true before the buyer is obligated to close.
• Interim covenants. What the seller must and must not do between signing and closing.
• Non-compete and transition terms. The seller's ongoing obligations after closing.

Sellers should not sign an LOI that assumes terms they have not discussed. The cost of a dispute is much higher during an exclusive period, when the buyer has leverage and closing costs are already committed.

Consents, Financing, and Third Parties

Two categories of work run in parallel with diligence and drafting. Each can delay a closing on its own.

The first is third-party consents. Leases, customer and supplier contracts, licenses, and lender agreements may require approval when ownership changes. Some consents are routine. Others take weeks, and some counterparties use the moment to renegotiate. Sellers should identify every consent required before the LOI is signed, then start the requests as soon as diligence allows.

The second is the buyer's financing. Most buyers need debt, and the lender runs its own diligence, appraisal, and credit approval. A lender that reduces leverage against a concentration or a forecast risk can change what the buyer can pay. Sellers should understand the buyer's financing plan and whether it is committed or still subject to approval.

What Derails a Deal Between Signing and Closing

Most failed deals fail in this window, and the reasons are usually predictable:

1. A diligence surprise. Undisclosed litigation, a lost customer, a tax exposure, or a payroll classification problem.
2. A re-trade. The buyer finds a reason to lower the price, and exclusivity leaves the seller with few options.
3. A consent that never comes. A key customer, landlord, or licensor delays or refuses.
4. A financing problem. The lender pulls back, changes terms, or tightens leverage.
5. A valuation gap that returns. A market or performance change puts the original number back in question.
6. A business that slows. A company that stalls during the process gives the buyer a reason to renegotiate.
7. Founder fatigue. Months of requests and meetings wear sellers down, and they accept terms they should not.

None of these are inevitable. Each one is easier to manage when the seller sees it coming.

How Sellers Keep the Process on Track

The seller's job during the LOI to close window is to stay organized, stay responsive, and stay in the business.

• Prepare the data room before the LOI, not after.
• Assign one point of contact for diligence requests and keep a running log.
• Keep the exclusivity period short and tied to milestones.
• Identify every third-party consent early and start the requests.
• Understand the buyer's financing and whether it is committed.
• Keep management focused on operations and on the numbers the buyer is watching.
• Use an experienced M&A lawyer for the purchase agreement, not a generalist.
• Track every open item to a named owner and a date.

The seller should also expect the process to be disruptive. Diligence will pull the owner and the management team away from the business. The buyers who close smoothly are usually the ones who planned for that time cost in advance.

Closing Day and the Wire

Closing is the moment the purchase agreement is signed, the conditions are satisfied, the consents are in hand, and the funds move. In some deals, signing and closing happen on the same day. In others, there is a gap while the last consents or approvals arrive.

After closing, the seller's remaining obligations begin. Escrow, earnout measurement, transition support, and indemnity periods all continue past the wire. The work of a sale does not end at closing. It shifts from negotiation to compliance with the terms the seller just signed.

Getting the Terms Right Before You Sign

The LOI to close window rewards preparation. A seller who knows the diligence requests in advance, keeps exclusivity short, and understands the financing and consent calendar is a seller who keeps leverage through the hardest part of the deal.

Considering a process, or reviewing an LOI you have already received? Bull Holdings can help you read the terms that matter before exclusivity, prepare the diligence materials buyers will ask for, and keep your options open to the last possible moment.

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This article reflects general market observations in the lower middle market advisory space. Owners considering a transaction should consult with a qualified M&A advisor and legal counsel specific to their situation and industry.