What causes deals to collapse or get retraded between the signed Letter of Intent and the closing table, and how do we protect our valuation during that window?

Question

Tyler Smith · Accepted Answer

The period between signing a Letter of Intent and closing is the most dangerous phase of any transaction. Once you sign the LOI, you enter exclusivity. The buyer has sole negotiating access, your operational momentum is strained, and deal fatigue sets in.

Deals retrade or fail during this window for three predictable reasons:
- Operational drift. Leadership gets distracted managing diligence requests, misses their quarterly numbers, and the buyer uses the dip to lower their valuation multiple.
- Surprises in diligence. The buyer finds customer churn, undocumented software licenses, key-person risk, or messy tax returns that were not disclosed upfront.
- Working capital disputes. The parties fail to define the net working capital peg accurately in the LOI, leading to a late fight over cash adjustments at closing.

To protect your valuation, run your exit like an EOS® process. Delegate the diligence process to a specific project manager on your Accountability Chart or an external advisor, keeping your leadership team laser-focused on their Rocks and the weekly Level 10 Meeting™. Your core business must hit or exceed its numbers while diligence is underway.

Second, populate a virtual data room with fully vetted documentation before signing the LOI. Disclose every wart early when you still have competitive tension among multiple suitors. Once exclusivity begins, surprise is the enemy of value.