We just signed our LOI and the buyer's counsel is trying to insert highly restrictive interim operating covenants that prevent us from hiring key staff or launching planned service lines before closing. How do we maintain our growth momentum?

Question

Tyler Smith · Accepted Answer

Interim operating covenants are designed to ensure you hand over the exact same business at closing that the buyer agreed to purchase. However, overly restrictive covenants can paralyze your operations, causing you to miss quarterly targets and lose momentum during the sixty to ninety days it takes to close the deal. To protect your business, you must negotiate specific dollar thresholds and operational carve-outs. Do not agree to a blanket ban on hiring. Instead, negotiate a clause that allows you to hire any employee with a salary below a specific amount without buyer consent. You must also preserve your ability to execute your quarterly Rocks. If your V/TO® includes launching a new service line or expanding an existing client relationship this quarter, this must be explicitly excluded from the restrictive covenants. Explain to the buyer that stalling your business plans will harm the company if the transaction fails to close. You must maintain the authority to manage your Accountability Chart and fill open seats as needed to keep the business healthy. Keep your weekly Level 10 Meetings™ running exactly as scheduled and treat the acquisition process as a separate, parallel track. By establishing clear, numeric boundaries for what requires buyer approval, you protect your daily operations and ensure your team stays focused on hitting their numbers.