Insights

What happens between the LOI and closing day

You signed the letter of intent. The price is agreed, the buyer seems serious, and it feels like the deal is done. Then sixty to ninety days go by, your inbox fills with drafts and schedules and requests, and you start wondering what exactly is taking so long.

What is taking so long is the purchase agreement. The LOI was an outline. The purchase agreement is the contract that actually transfers your business, and almost everything that decides what you walk away with gets settled inside it. Here is what happens in that stretch, and where owners get caught off guard.

The LOI was the outline. This is the contract.

Most of the LOI is non-binding. It sets price and broad structure, and it commits both sides to negotiate in good faith. The definitive purchase agreement is the binding document. Depending on how the deal is structured, it is an asset purchase agreement or a stock purchase agreement, and it runs anywhere from forty to well over a hundred pages before exhibits.

That gap between a three-page LOI and a hundred-page contract is where the details live. What exactly is being sold. What happens if the numbers move between signing and closing. What you are promising about the business, and what it costs you if one of those promises turns out to be wrong. Owners who treat the LOI as the finish line are often surprised by how much is still open. The people who work on deals treat the LOI as the start of the real negotiation.

Who drafts it, and why that matters

In most middle-market deals, the buyer's attorney writes the first draft. That is normal, and it is not a conspiracy. It is also not neutral. The first draft sets the baseline on every open point, and it will lean toward the buyer on all of them: longer survival periods, bigger escrow, broader promises from you, more conditions on their obligation to close.

Every point you do not push back on stays in. That is why your side needs an M&A attorney reviewing this document, not a general business attorney who handles your leases and your vendor contracts. This is a specialty. The cost of the right lawyer here is small compared to a single indemnification clause that stays too broad for too long.

What is actually inside it

Strip out the defined terms and the boilerplate and the agreement does five things:

• Sets the price and how it moves. Not just the number, but the working capital adjustment, the escrow or holdback, any seller note or earnout, and the true-up after closing.
• Defines what is being sold. In an asset sale this matters enormously: which assets transfer, which liabilities the buyer takes on, and which stay with you.
• States your reps and warranties. Your factual promises about financials, taxes, contracts, employees, litigation, and compliance, backed by indemnification and the escrow if one proves wrong.
• Sets covenants between signing and closing. What you must and must not do while the deal is pending. Usually: keep running the business normally, do not take on new debt, do not sign unusual contracts, do not give raises outside the ordinary course.
• Lists closing conditions. The things that must be true or done before either side is required to close.

Reps and warranties are the piece with the longest tail, because they can reach into your pocket long after the deal is done. If you have not read it yet, start with our post on reps and warranties when selling a business.

The disclosure schedules are your job

Attached to the agreement is a set of schedules that carve out the exceptions to everything you promised. All material contracts. All litigation, past and threatened. All employees and compensation arrangements. All liens. All related party transactions.

This is the part that lands squarely on the seller, and it is more work than most owners expect. It is also the seller's best protection. Anything you disclose accurately in the schedules cannot later be a breach of the reps. The instinct to keep a small ugly item off the list is exactly backwards. Disclosed problems are the buyer's problem. Undisclosed problems come out of your escrow.

Owners who have kept clean records and built a data room early get through schedules in days. Owners starting from a shoebox spend weeks, and every one of those weeks is a week the deal is not closing.

Signing, closing, and the days in between

Sometimes signing and closing happen the same day. Often they do not. When they are separated, it is because something still has to happen: the buyer's lender needs to fund, a landlord has to consent to the lease assignment, a large customer contract has a change of control clause, a license or permit has to transfer, or a regulatory filing has to clear.

Those third party consents are a common source of delay and worth flagging early. If your biggest contract says it cannot be assigned without the counterparty's written approval, that counterparty effectively has a vote on your deal. Knowing that in month one is very different from discovering it the week of closing.

Closing day itself is usually anticlimactic. Signature pages get released, the funds flow statement is finalized, wires move, the escrow funds, your debt gets paid off, and you receive your cash at close. The working capital true-up follows in the next sixty to ninety days, and the escrow releases on its own schedule after that.

Where this stretch goes wrong

Deals die between the LOI and closing more often than anywhere else, and the causes repeat. Diligence turns up something the buyer did not expect and they reprice. Schedules take too long and momentum drains out. The business has a soft quarter under contract and the buyer gets nervous. Or a term everyone waved through in the LOI turns out to mean two different things to the two sides.

The through line is that your leverage peaks the day you sign the LOI and declines every day afterward, because exclusivity means you no longer have another buyer to walk to. The way to protect yourself is to be specific in the LOI about the terms that matter, and to be ready before you sign it. Clean financials, an organized data room, and problems already surfaced and priced in are what carry a deal through this stage intact. There is more on that pattern in the Insights library.

The bottom line for Plano owners

Plano and the wider North Texas market are full of serious buyers, and serious buyers bring serious documents. The owners who come through the purchase agreement stage with their number intact are the ones who prepared before the LOI, not after. If you want to know what this stretch will look like for your business, see how a full sell-side process works on our Texas business broker page, learn how we work with owners on our Plano business broker page, or book a confidential call and we will walk you through it.

This is general information, not legal or tax advice. Have an M&A attorney and a transaction CPA review any purchase agreement before you sign it.

Frequently asked questions

What is the difference between an LOI and a purchase agreement?

The letter of intent is mostly non-binding. It sets the headline price, the broad structure, and an exclusivity period, and it signals that both sides intend to do a deal. The purchase agreement is the binding contract that actually transfers the business. It is far longer and far more detailed, and it settles everything the LOI left open: the exact price mechanics, the working capital adjustment, your reps and warranties, indemnification and escrow, covenants, and closing conditions. Signing an LOI is not selling your business. Signing the purchase agreement is.

How long does it take to get from LOI to closing?

Sixty to ninety days is typical for a middle-market deal, and it can stretch longer if the buyer needs financing, if third party consents are required, or if diligence turns up surprises. The single biggest variable is seller readiness. Owners with clean accrual financials and an organized data room move fast. Owners assembling records for the first time under a deadline can add a month or more, and delay is risk, because momentum lost during exclusivity is hard to get back.

Who writes the purchase agreement when you sell a business?

The buyer's attorney almost always drafts the first version. That draft will lean toward the buyer on every negotiable point, which is normal and expected. Your M&A attorney marks it up and negotiates it back toward the middle. Use a lawyer who does M&A specifically, not the general business attorney who handles your everyday contracts. The terms in this document determine how much of your money is at risk and for how long.

What are disclosure schedules and why do they matter?

Disclosure schedules are the attachments that list the exceptions to your reps and warranties: your material contracts, litigation, employees, liens, and related party transactions. They are the seller's strongest protection, because anything you disclose accurately cannot later be claimed as a breach. Leaving something small and unflattering off the schedules is the most expensive shortcut in the whole process, since undisclosed issues come out of your escrow. Be complete, be accurate, and start early.