Steps After Signing the Letter of Intent (LOI)
A structured guide to navigating due diligence, financing, and closing — from LOI to ownership transfer.
The Road from LOI to Close
Each phase builds on the last — thoroughness early in the process protects both buyer and seller at the closing table.
Due Diligence
Financial Review
Analyze historical financials, tax returns, and accounting records to verify revenue, profits, and expenses — checking for inconsistencies.
Legal Review
Assess contracts, intellectual property, pending litigation, and regulatory compliance to identify legal risks.
Operational Analysis
Evaluate supply chain, management processes, customer relationships, and key personnel.
Risk Assessment
Identify contingent liabilities, industry-specific challenges, or environmental issues.
Due Diligence
Site Visits & Interviews
Why It Matters
Site visits and management interviews provide ground-level insight that financial statements alone cannot reveal — validating the story behind the numbers.
What to Expect
- Tours of key operational facilities
- Interviews with management and key employees
- Day-to-day operations assessment
- Culture and team dynamics evaluation
Quality of Earnings (QoE) Analysis
Revenue Verification
An external firm verifies the accuracy and sustainability of revenue streams, assessing sales trends and customer contracts.
Expense Analysis
Distinguishes between one-time costs and ongoing operational expenses to ensure earnings are accurately represented.
Working Capital Assessment
Evaluates working capital to ensure it meets business requirements without affecting post-acquisition cash flow.
Quality of Earnings
Normalization & Cash Flow
Normalization of Earnings
The QoE firm adjusts earnings to exclude non-recurring or extraordinary items, providing a clearer picture of ongoing profitability — the true baseline for valuation.
Cash Flow Analysis
A detailed review of cash flow generation and usage verifies the company's ability to meet its financial obligations post-transaction.
Potential Adjustments to Terms
Due diligence and QoE findings often prompt renegotiation. Both parties should be prepared to revisit deal terms based on what the analysis uncovers.
Valuation Adjustments
If discrepancies are found, the purchase price may be renegotiated — up or down — based on findings.
Risk Mitigation
Buyers may introduce indemnities, holdbacks, or escrow arrangements to protect against identified risks.
Deal Structure Revisions
Payment timelines, earn-outs, or performance milestones may be modified to reflect new information.
Contractual Adjustments
Key customer or supplier agreements may require renegotiation or addendums to ensure a smooth post-sale transition.
Financing Finalization
01
Securing Funding
Buyer arranges financing through loans, lines of credit, or equity investment to ensure sufficient capital for the acquisition.
02
Lender Due Diligence
Lenders conduct their own review of the company's financials, forecasts, and risk factors before committing to funding.
03
Financing Documents
Buyer finalizes loan agreements, investment documents, and other funding instruments with clearly laid out financial obligations.
04
Equity Contributions
If equity investors are involved, the buyer coordinates with stakeholders to secure final commitments.
Final Review & Closing Preparation
Drafting Final Agreements
Legal teams finalize the Purchase Agreement, Bill of Sale, and any non-compete or employment agreements.
Condition Verification
Both parties confirm all LOI conditions — including third-party consents and regulatory approvals — are satisfied.
Ownership Transition Planning
Buyer and seller collaborate on asset transfer, IP handover, and notifying customers and vendors.
Closing Documents Review
Both parties review all closing documents to ensure compliance with agreed-upon terms and post-closing obligations.
Tax & Accounting Preparations
Accounting teams coordinate to ensure correct tax treatment and financial reporting post-closing.
Closing
Execute Documents
Both parties sign the Purchase Agreement and all required contracts.
Transfer Funds
Buyer transfers agreed-upon funds — in full, via escrow, or per installment terms.
Transfer Assets
Legal ownership of physical property, IP, customer contracts, and key assets transfers to the buyer.
Employee Transition
Seller coordinates with buyer on key employee transitions, role changes, and contract modifications.
Post-Closing Adjustments
Both parties address remaining adjustments — working capital true-ups or earn-out provisions, if applicable.