Common Misunderstandings That Can Undermine an M&A Deal

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 795 words

Five misunderstandings undermine more M&A deals than any market condition: treating the letter of intent as the finish line, assuming there is one standard deal structure, trusting that every offer is funded, believing an owner can run the sale alone, and thinking a sale must be all or nothing. Each leads owners to relax too early, accept the wrong terms or waste months on the wrong buyer.

Here is what actually happens in each case, and how to protect yourself.

The letter of intent is a starting line

A letter of intent (LOI) sets out the proposed price and main terms and usually gives the buyer a period of exclusivity. Apart from a few clauses, such as confidentiality and exclusivity itself, it is normally not binding. The buyer then runs due diligence: financial records, contracts, operations, legal and tax matters, employees and sometimes an environmental review. Anything new it finds can lead to a request to renegotiate, and some deals end there. Until the definitive purchase agreement is signed and the deal closes, nothing is certain.

Protect yourself by making the LOI as specific as possible on the points that matter most to you, such as working capital, how much is paid at closing and your role afterward, by keeping exclusivity reasonable, and by disclosing known problems before you sign. More detail is in what happens after you receive a letter of intent.

There is no single standard structure

Owners often picture a sale as a buyer handing over a check. In practice, the price can be built from several parts: cash at closing from the buyer's own money, a bank or SBA loan, a seller note repaid over time, an earnout paid later if targets are met, a rollover in which you keep a stake, and adjustments for debt and working capital. Some buyers propose taking on certain liabilities. Each piece shifts risk between buyer and seller, so two offers with the same headline can differ widely in what you actually receive and when. Ask your CPA to translate each offer into after-tax dollars, and understand every component before negotiating; our business financing page shows how the common structures fit together.

Not every offer comes with money behind it

An offer is only as good as the buyer's ability to close. Some interested parties have not arranged financing, have not done the work needed to make a decision, or are simply exploring. Entertaining them costs time, distracts you from the business and can crowd out a qualified buyer. Ask for proof of funds or financing capacity before serious negotiation, check how much of the price depends on a lender, and treat a buyer's reluctance to show its finances as information worth having. A buyer that has closed acquisitions before, and can explain exactly where the money is coming from, is worth more than a slightly higher offer from one that cannot.

Running the sale alone costs more than it saves

Selling a company involves valuation, marketing, buyer screening, negotiation, due diligence, tax structure and legal drafting. An owner handling all of that while running the business usually shortchanges both, and a dip in results during the sale reduces the price. The team that protects you normally includes an M&A advisor, a transaction attorney who has closed deals of your size, and a CPA who understands how sales are taxed. Their job is to structure good terms, spot problems before they grow and keep you focused on the company, so that its value holds from the first meeting to closing. It also sends a signal: buyers take a seller with experienced representation more seriously.

A sale does not have to be all or nothing

Many owners assume the only choice is to sell everything and leave. There are other paths. A majority recapitalization sells control, often to a private equity group, while you keep a minority stake that may be worth more later. A minority investment brings in capital while you keep control. A partial sale or a strategic partner can provide some cash while you stay involved. Each suits different goals and stages of life, and each carries its own risks. Our answer on when a recapitalization makes more sense than a complete sale compares the options.

How MDR & Associates keeps deals on track

MDR & Associates screens every buyer with a confidentiality agreement and a financial profile before any detail is shared, negotiates multiple letters of intent at once, and has a principal in every negotiation through due diligence and closing. The firm works alongside your attorney and CPA and can arrange SBA, conventional and seller-financed structures. Across more than 250 closed transactions since 2008, it has seen each of these misunderstandings play out. To talk about your own situation, contact us.

Where this fitsHow a business sale works, step by step →

Questions owners ask next

How long should exclusivity last after I sign an LOI?

Long enough for the buyer to complete due diligence and arrange financing, and no longer. The length is negotiated in the LOI. Keep it as short as is realistic, ask for milestones along the way, and make sure exclusivity ends if the buyer misses them or tries to change the agreed terms.

Can a buyer lower the price after the LOI is signed?

It can ask, and some buyers do, usually citing something found in due diligence. Whether you agree depends on whether the finding is real and material, and on your alternatives. Keeping backup buyers warm and disclosing issues before the LOI are the best protections against an opportunistic retrade.