Offers & due diligence
What happens after I receive a letter of intent to buy my business?
What a letter of intent commits you to, what to negotiate before signing, and the sequence of steps from signed LOI to closing.
By Michael D. Rubin, CEO & Founder · September 2026 · 948 words
When you receive a letter of intent, you review it with your advisor and attorney and negotiate the terms that matter before you sign; once signed, the buyer gets a period of exclusivity to complete due diligence while attorneys draft the purchase agreement that leads to closing. The letter is mostly non-binding, but the terms in it shape everything that follows.
A letter of intent (LOI) is a short document, often only a few pages, in which a buyer states the price, how it will be paid and the main conditions of the deal. It is the moment a sale becomes real, and it is also the moment your negotiating leverage is at its highest.
What is binding and what is not
Most of an LOI, including the price and structure, is typically non-binding: either side can still walk away before the purchase agreement is signed. A few provisions are usually binding from the moment you sign. Common ones are exclusivity, meaning you agree not to negotiate with other buyers for a set period; confidentiality; and who pays which costs.
Your transaction attorney should confirm which clauses bind you before you sign anything. Non-binding does not mean unimportant: buyers and sellers both treat the letter as the blueprint, and reopening a term later is much harder than getting it right now. Before signing, also check the date the exclusivity period ends and whether you can end it early if the buyer misses agreed milestones. An exclusivity clause with no end date or no exit is one of the few LOI terms that can hurt you even if the deal never happens.
Negotiate before you sign, not after
Once you sign and grant exclusivity, other buyers step back and your bargaining power drops. The details worth pressing for, listed below, should be pinned down in the letter rather than left for the definitive agreement.
Buyers sometimes say such details are normally worked out later. Some can be, but every term left open is a term negotiated after your alternatives have gone. A reasonable buyer that intends to honor its offer rarely objects to writing it down clearly. Expect a round or two of revisions to the letter before signing; that is normal and a sign both sides are taking it seriously.
- How much of the price is cash at closing, and how much is a seller note, earnout or rollover equity
- The working capital target, called the peg, or at least the method for setting it
- The size and length of any escrow or holdback
- Your role and pay after closing, and the non-compete terms
- How long exclusivity lasts, and what ends it early
The sequence after signing
Once the letter is signed, several things start at once. The buyer's team sends a list of documents it wants to see, the attorneys begin drafting, and, if the buyer is borrowing, its lender opens its own file. Your advisor coordinates the flow of information so you are not answering the same question three times, and so nothing leaves the company without a reason.
How long this takes depends on the size of the company, how ready your records are and how the buyer is financing the purchase. MDR & Associates' typical timeline from engagement to funds wired is three to nine months, and the period after an LOI is signed is a substantial part of it. The stages look like this:
| Stage | What happens | Your role |
|---|---|---|
| Exclusivity begins | You stop talking with other buyers for the agreed period | Keep backup buyers aware that you are in a process, not that it is over |
| Due diligence | The buyer examines financials, contracts, employees, operations and legal matters | Answer requests quickly and completely; run the business normally |
| Financing | The buyer's lender reviews the company and may order appraisals or inspections | Provide what the lender asks for, through your advisor |
| Purchase agreement | Attorneys draft the definitive agreement with representations, warranties and indemnities | Review it with your attorney and resolve open points |
| Closing | Documents signed, debt paid off, funds wired | Sign, then begin the handover to the new owner |
If you have more than one letter
Several letters at once is the best position a seller can be in, and the time to use it is before you sign any of them. Put the offers side by side on cash at closing, money paid later, risk and certainty of closing, then go back to the leading buyers for improvements. The guide on how to compare offers shows how to do it. Once you pick one, tell the others you are proceeding with another party for now; do not close the door until the deal has closed.
Mistakes to avoid after an LOI
The long read on what causes a sale to fall apart in due diligence explains why the second and third mistakes are so costly.
- Telling employees or customers that the company is sold
- Letting results slip while your attention is on the deal
- Holding back a known problem that diligence will find anyway
- Signing a long exclusivity period on a vague letter
- Cutting off every other interested buyer the day you sign
How we handle a letter of intent
At MDR & Associates, letters of intent are step six of our ten-step process, and we aim for several at the same time. We have a fiduciary duty to present each offer to you in person, and you decide whether to accept, reject or counter. A principal of the firm is in every negotiation, and we work alongside your transaction attorney and CPA through due diligence, legal documents and closing. If a letter of intent has already arrived, contact us before you sign it.
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