Do visions of a celebratory closing dinner dance in your head while a stack of pre‑deal tasks begs for attention? You’re not alone. Many owners, CEOs, and corporate‑development leads view the Letter of Intent (LOI) as the official starting pistol for an M&A transaction. In reality, the deal’s fate is largely sealed well before any document titled “LOI” changes hands.
The actions you take— or skip—in the run‑up to that moment can shave weeks off diligence, protect valuation, and preserve your leverage. Below are seven pre‑LOI maneuvers that genuinely move the needle. Nail these now and the rest of the process will feel less like triage and more like good, old‑fashioned execution.
1. Scrub and Simplify Your Financials
No buyer expects Big‑Four polish from every target, but they do expect numbers they can trust. Engage an outside CPA for a light sell‑side quality‑of‑earnings review, reconcile revenue recognition policies, and park any one‑off “adjustments” in a clean schedule.
A trustworthy P&L beats a glossy pitch deck every time—and spares you the awkward back‑pedaling when a sharp analyst catches that mysterious “other income” propping up EBITDA. The goal isn’t window dressing; it’s eliminating surprises so the buyer’s first pass feels like confirmation, not discovery.
2. Craft a Value Narrative—With Evidence
An LOI may ride on spreadsheets, yet it’s the story behind the numbers that opens wallets. Answer three questions:
- Why do we win today?
- Why will we keep winning tomorrow?
- Why is that victory worth more inside the buyer’s ecosystem than on its own?
Back every claim with hard data—net‑revenue retention, patent protection, recurring‑revenue mix, or production throughput. A crisp narrative can elevate you from “nice tuck‑in” to “must‑have platform,” and that shift is often the difference between a 7× and a 10× multiple.
3. Surface Deal Killers Early
Skeletons live in every closet—unassigned IP, rolling tax audits, unofficial profit‑sharing promises scrawled on napkins. Hiding them until the eleventh hour only hands negotiating leverage to the other side. Make a punch list, then triage: fix what you can (e.g., missing customer‑contract consents) and prepare remediation plans for what you can’t. When you convert a problem from “unknown risk” to “quantifiable cost,” buyers price it far less harshly.
4. Stress‑Test the Forecast
Think of your model as the first handshake. Offer projections everyone internally believes, then build baseline, downside, and upside cases. Link each scenario to tangible levers—hiring timelines, supply‑chain capacity, churn‑mitigation efforts. A sober forecast doesn’t dilute valuation; it boosts credibility and often results in a crisper, less contingency‑laden offer because the buyer trusts the numbers.
5. Assemble Your A‑Team and Define Roles
M&A is a team sport. Identify who’s on the field before an LOI arrives. At minimum you need:
- Internal Lead: CFO or corp‑dev head to own calendars and approvals.
- Functional SMEs: Finance, HR, IT, and ops leaders who can feed diligence quickly.
- External Advisors: An M&A attorney with both buy‑ and sell‑side reps under their belt, a banker if you’re running a competitive process, and a tax strategist.
Equally important is who doesn’t need to know—yet. Premature chatter spooks employees and customers. Keep the circle small, lock NDAs in place, and script communications. Deals leak less when everyone knows precisely what they are—and aren’t—responsible for.
6. Pre‑Qualify the Buyer (or Target) List
All money is green, but not all capital clears closing. Sellers should vet suitors for cultural compatibility, regulatory complications, and funding certainty. A strategic requiring Hart‑Scott‑Rodino clearance can add six months; a PE fund nearing the end of its investment window may push for an earn‑out you’d rather avoid.
Buyers should conduct the mirror image: gauge whether shareholder incentives align and whether price expectations are sane. A candid coffee chat now can save you weeks of modeling a deal that was never feasible.
7. Map Culture and Integration at 30,000 Feet
Integration planning often gets punted until after the LOI, yet culture clashes are easier to prevent than to fix. You don’t need a full IMO today, but sketch how systems, reporting lines, and customer‑facing processes might merge. Ask whether decision‑making cadences match and whether key talent will thrive in your structure. If the gaps look unbridgeable, better to know before headlines announce a deal that later unravels.
Why These Maneuvers Matter
An LOI sets value, structure, and exclusivity—but once you sign, your leverage drops sharply. Confirmatory diligence, site visits, and board approvals fill the calendar, leaving no time for basic housekeeping. Handle the unglamorous work now and you’ll avoid haggling over every nickel of working‑capital adjustment later.
Common Pitfalls to Dodge
- Over‑engineering the CIM: Buyers want clarity, not a 120‑page novella.
- Waiting for the other side to run the process: Drive your own timeline or become a passenger.Ignoring post‑deal employment terms: Cash at closing loses luster if a hazy earn‑out ties you to KPIs you can’t control.
- Treating advisors as box‑checkers: A seasoned banker or lawyer is a strategic partner—loop them in early, not the night before signing.
The Bottom Line
You can’t foresee every curveball, but you can prepare for most. Tighten financials, hone a data‑backed story, flag deal killers, and build the right team. When that LOI finally lands, you’ll negotiate from a position of strength, not scramble to plug holes. That posture protects valuation, compresses diligence, and leaves you with one last task: booking that well‑earned closing dinner.
