Pioneer Buy-Side Brief: The LOI is Where Deals Go to Die
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This post is written by guest writer Eric Pacifici of SMB Law Group, the leading SMB M&A law firm in the country. Follow him on X. The LOI is Where Most Deals Go to Die Here’s how to make sure yours doesn’t. Most business owners spend hours agonizing over the asset purchase agreement. Smart buyers know the real leverage is upstream… in the LOI. We’re SMB Law Group, a boutique M&A law firm built for business buyers. In just the last two years, we’ve helped clients close over $1 billion in transactions, mostly in the lower-middle market. We’ve represented first-time searchers, seasoned holding companies, and family offices alike. We don’t do hourly billing. We don’t nickel and dime. We help deals close. Our edge? We understand what kills momentum between “LOI signed” and “funds wired.” The 2025 edition of our Letter of Intent (LOI) template is now live, and we’re giving it away for free. More on that below! But first, here’s what we’ve learned from reviewing hundreds of LOIs over the years: Ways LOIs Get Buyers Into TroubleToo Vague, Too Soon Most busted deals start with a vague LOI. It’s either too light on economic terms or filled with ambiguous “handshake” language that means different things to different people. If you don’t clearly define the purchase price breakdown, working capital expectations, and transition terms, you’re setting up a conflict during the APA phase. Your LOI should answer: How much cash at close? Is there a seller note? Is it interest-only? Will there be a working capital adjustment? What’s the scope of post-close support? If your answer is “we’ll figure that out later,” the deal might not make it to later. Wrong Mix of Binding vs. Non-Binding An LOI isn’t a contract, but parts of it should be. We’ve seen buyers agree to exclusivity with no protection. Or worse… accidentally bind themselves to economic terms while thinking they had an easy out. Our rule of thumb: Binding: confidentiality, exclusivity, governing law, expenses, and dispute resolution. Non-binding: all economic terms until you’ve done the diligence. The best LOIs give the buyer room to walk, but enough structure to get the seller committed and focused. No Room to De-Risk Great LOIs create leverage, especially for buyers using seller notes, SBA debt, or contingent earnouts. The LOI is where you set the tone on: Personal guarantees Subordination clauses Client retention metrics for earnouts Offset rights for indemnification You don’t want to “sneak this in later.” That’s how you end up renegotiating under pressure—or blowing up trust with the seller. Why We Made a Free LOI Template After helping buyers close hundreds of deals, we realized most people don’t need a custom LOI. They need a smart starting point. So we built it. Our 2025 LOI Template includes: Smart defaults based on real-world terms Clear footnotes to guide negotiation Built-in seller note terms, working capital language, and more A framework that helps get the deal to closing, not just to signature Oh, and if you use our LOI, we’ll review and revise it for free. No catch. 👇 Join Us Live – April 22, 2025 We’re walking through the 2025 LOI Template line by line. You’ll learn: How to avoid the top LOI landmines What we really think about exclusivity periods Why deals stall—and how to prevent it This is not a webinar. This is a live working session with our team… open Q&A, real examples, and tactical insights from the trenches. Free to attend. High signal only. Let’s close more deals. Eric Pacifici Founding Attorney, SMB Law Group LLP Deal lawyer, entrepreneur, ex-Kirkland And if you have any questions for Matthias, contact him here: Matthias Email: matthias@pioneercap.com Phone: (608) 421-2750 Disclaimer: The information in this newsletter is for informational purposes only and should not be considered legal or financial advice. Business buyers are encouraged to consult with their legal counsel and accountant to ensure the proper structuring of their transactions and to fully understand the tax implications of seller financing. Thanks for reading! Feel free to reply directly to this email with any questions or thoughts. |
Pioneer Capital Advisory LLC
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