The Letter of Intent restricts us from making any changes outside the ordinary course of business before closing, but we need to implement a planned operational software transition to hit our quarterly goals. How do we negotiate the interim covenants so we do not freeze our strategic initiatives while waiting for the deal to close?

Question

Tyler Smith · Accepted Answer

The interim covenant period between signing the Letter of Intent and closing is designed to keep the business stable, but buyers often use ordinary course of business clauses to freeze your operations. If you are in the middle of a critical software migration or leadership transition, halting that progress to seek buyer approval can destroy your operational momentum and cause you to miss your current quarterly Rocks. To prevent this operational paralysis, you must negotiate specific exclusions to the ordinary course covenant before signing the LOI. Do not accept a blanket restriction. Instead, build a schedule of permitted actions directly into the agreement. This schedule should explicitly allow you to execute any initiatives already approved in your current V/TO® or operational budget. Specify that you retain the authority to hire or promote team members into open seats on your Accountability Chart up to a certain salary threshold. Keep the buyer informed of your progress during regular updates, but do not ask for permission for items already listed in your permitted actions schedule. This maintains your momentum, keeps your leadership team focused on their weekly measurables, and ensures that if the deal does fall through, your business has not been crippled by months of forced inactivity.