We signed an LOI and are in the ninety-day window before closing, but our ordinary course of business covenant prevents us from making major operational moves, yet we desperately need to restructure our Accountability Chart and fire a toxic employee. How do we handle these critical operational decisions without breaching the covenant or giving the buyer an excuse to walk?

Question

Tyler Smith · Accepted Answer

The period between signing the LOI and closing is a highly vulnerable time. The buyer will insist on an ordinary course covenant, which restricts you from making material changes to the business without their written consent. However, you cannot let your business freeze or decay while waiting for a deal to close.

If you need to fire a toxic employee or restructure your Accountability Chart, you must proactively manage the communication with the buyer. Do not do it in secret. Present the change as a routine execution of your V/TO® and a necessary step to protect the business’s EBITDA, which directly benefits the buyer. Frame the decision around maintaining operational excellence and preserving the momentum of your quarterly Rocks.

To handle this without giving the buyer leverage to renegotiate, draft a specific list of carve-outs in the LOI and the purchase agreement. These carve-outs should explicitly permit you to make hires, terminations, and compensation adjustments below a certain dollar threshold without prior approval. By establishing these clear operational boundaries early, you protect your authority to run your company efficiently and keep your team focused on delivering results all the way to the closing table.