Beyond the LOI: What Happens After You Sign the First Agreement
The LOI Isn’t the Finish Line—It’s the Starting Gun
For many first-time acquirers, signing the Letter of Intent (LOI) feels like a major milestone—and it is.
But what many buyers don’t realize is that the real work begins after the LOI is signed.
Due diligence, final deal structuring, final negotiations, and integration planning all happen post-LOI—and if you don’t manage this phase correctly, you risk overpaying, discovering deal-breaking issues too late, or struggling with post-close execution.
If an LOI isn’t followed by a clear, well-managed process, buyers can find themselves in a high-stakes scramble, either losing leverage or uncovering problems that should have been addressed earlier.
In this article, I’ll walk through what really happens after an LOI is signed, what buyers need to focus on, and how to avoid common pitfalls that derail deals.
What the LOI Really Means (And What It Doesn’t)
The LOI sets the foundation for the deal by outlining key terms—purchase price, structure, exclusivity, and key contingencies—but it is not the final agreement.
What the LOI does:
• Locks in exclusivity, preventing the seller from negotiating with other buyers.
• Establishes the broad financial and structural framework of the deal.
• Signals serious intent from both parties.
What the LOI does not do:
• Guarantee that the deal will close.
• Prevent price adjustments based on due diligence findings.
• Ensure post-sale integration success.
Example:
A GovCon buyer signed an LOI to acquire a firm with a prime IDIQ contract. During due diligence, they discovered that the seller had misrepresented their contract backlog, and a key recompete was unlikely to be renewed. Because the LOI allowed for adjustments, the buyer renegotiated the deal structure, reducing the upfront cash portion and tying payments to contract performance.
What Happens After the LOI: The Key Phases Buyers Need to Manage
Once the LOI is signed, the real work begins. Here are the four key phases buyers must navigate:
1. Due Diligence: Uncovering the Truth Before It’s Too Late
Signing an LOI means you’ve done some initial research, but due diligence is where you validate (or challenge) everything the seller has told you.
Key areas to focus on:
· Financial health – Are the revenue projections accurate? Are there any hidden liabilities? What is the project profitability?
· Contract stability – Are key contracts set for recompete? Are there small-business set-aside risks?
· Workforce retention – Are key employees staying? Are salaries, benefits, and clearance statuses aligned?
· Operational risks – Are there IT, HR, or compliance issues that could cause problems post-close?
Example:
A buyer was set to acquire an IT firm based on projected $15M revenue. Due diligence revealed that $5M of that revenue depended on an single-award IDIQ contract that the seller was likely to lose, significantly impacting the valuation. The buyer adjusted their offer, tying part of the purchase price to the retention of key contracts.
Pitfall to avoid:
Trusting seller-provided data without verification. Always conduct your own financial, legal, and operational analysis.
2. Final Deal Structuring: Making Sure the Terms Still Make Sense
The initial terms in the LOI aren’t always the final terms of the deal. If due diligence uncovers risks, buyers should adjust the structure accordingly.
Best practices for smart deal structuring:
· Use earn-outs – Tie part of the price to future revenue or contract wins.
· Negotiate seller financing – Reduce upfront risk and align incentives.
· Ensure proper indemnifications – Protect yourself against misrepresentations.
Example:
A buyer was acquiring a professional services firm with $10M in backlog. However, 40% of the backlog was tied to a single contract with uncertain renewal. Instead of walking away, they structured an earn-out where part of the purchase price was only paid if the contract was successfully renewed. This protected the buyer while still giving the seller the opportunity to earn full value.
Pitfall to avoid:
Failing to adjust pricing based on due diligence findings. If risks are uncovered, structure the deal to mitigate them.
3. Integration Planning: Preparing for a Smooth Transition
One of the biggest mistakes buyers make is waiting until after the deal closes to think about integration.
What should be planned before closing?
· Leadership transition – Who will run the company post-close? How long will the seller stay?
· Employee communication strategy – How will employees be informed? What incentives will keep them engaged?
· Operational & IT integration – Are there redundancies or systems that need to be merged?
Example:
A buyer acquired an engineering firm with 50 employees. Instead of waiting until close, they held meetings with key leadership before finalizing the deal, ensuring alignment on culture, reporting, and operations. As a result, the transition was seamless, and employee retention remained over 90% post-close.
Pitfall to avoid:
Ignoring integration planning until after closing. Many deals fail not because of bad financials, but because of poor integration execution.
4. Closing & Post-Close Execution: The First 90 Days Matter Most
Once the deal is signed, execution is everything—the first 90 days post-close determine whether the acquisition succeeds or struggles.
Key areas to focus on immediately:
· Customer relationships – Ensure agency contacts are informed and engaged.
· Employee retention – Provide clarity, stability, and incentives to keep key talent.
· Financial performance tracking – Monitor contract renewals, revenue targets, and cost synergies.
Example:
A buyer acquired a cybersecurity firm and immediately scheduled joint meetings with key agency clients within the first month of closing. This reassured contract officers that service levels would remain strong, helping to secure renewals and protect revenue continuity.
Pitfall to avoid:
Assuming the hard work is over at closing. The deal only succeeds if post-close execution is handled correctly.
Final Thoughts: The LOI is Just the Beginning
If you’re buying a business, signing the LOI is a major milestone—but it’s not the finish line.
The best acquisitions succeed because buyers manage the post-LOI process strategically—from due diligence to integration planning to post-close execution.
If you’re considering an acquisition, I help business owners:
· Navigate due diligence to uncover risks before it’s too late.
· Structure deals that protect them from unexpected surprises.
· Ensure a seamless post-close integration for long-term success.
Let’s discuss your acquisition strategy. Schedule a call today.