Before You Sign the LOI

I won't let a client sign a letter of intent that locks in deal structure before we've looked at what's underneath the business. That's the line.

Most middle-market deals go sideways not because the lawyers missed a clause, but because the structural decisions were already baked into the LOI before anyone with deal experience weighed in. By the time you're negotiating the purchase agreement, you're negotiating within the box the LOI built. If the box is wrong, the agreement is wrong.

Here are three calls from live deals — and how each one played out.

Get the Structure Right Before the LOI

Owner of a professional services business. North of $30 million in revenue, solid margins, a real company. Gets an unsolicited offer from a strategic buyer. The buyer's term sheet proposes a stock deal. Clean and simple, the buyer says. Tax-efficient for both sides.

I pulled the corporate records and found a deferred regulatory issue — nothing fatal, but the kind of thing that becomes a trailing liability in a stock purchase. The buyer would inherit it, know they inherited it, and use it to retrade after diligence. I've seen that movie.

We restructured as an asset deal. Left the compliance matter behind as an excluded liability. Allocated purchase price so the buyer got the step-up they would have lost in a straight stock purchase. The owner closed clean, with no indemnification tail on the compliance matter.

The difference between an asset deal and a stock deal isn't a tax planning exercise. It's the difference between a clean exit and a phone call from buyer's counsel eighteen months later.

Make the Paper Match the Diligence

Buy-side. PE sponsor acquiring a niche manufacturer — mid-$20s enterprise value, decent EBITDA, and a customer concentration problem nobody wanted to talk about. One customer was north of a third of revenue. The contract had a 60-day termination clause.

Diligence doesn't mean anything if the purchase agreement doesn't reflect what you found. I see this constantly — a thorough diligence memo sits in the data room, the reps and indemnities read like a template. The findings never made it into the paper.

On this deal, I built a specific indemnity for customer attrition tied to that contract. If the customer reduced volume by more than 15 percent in the first twelve months, the seller bore a defined share of the loss. I restructured the earnout measurement to exclude revenue from that single customer, so the seller couldn't ride one relationship to hit targets. The disclosure schedule quantified the exposure — exact revenue figures, contract terms, renewal history — instead of a vague reference to "customer concentration risk."

Seller's counsel treated the specific indemnity as a retrade. It wasn't. The math was on our side, and the seller knew the concentration was real. We closed with the protection in place.

A diligence finding that doesn't change the paper is a finding that doesn't protect anyone.

Close and Twenty-Four Months After

Sell-side. Upper-middle-market deal with a two-year earnout tied to EBITDA targets. My client was staying on to run the division post-close. The buyer wanted alignment. The seller wanted upside. An earnout was the natural bridge.

Earnouts blow up for one reason: the buyer controls the operating environment, and the seller's payout depends on results within that environment. If the buyer can reallocate corporate overhead, terminate key employees, or restructure the division during the measurement period, the earnout target becomes a moving goalpost.

I drafted operational covenants that locked the division's cost structure during the measurement period. No reallocation of shared costs without consent. No termination of named key employees without cause and a defined replacement timeline. No material change to the division's operating scope without mutual agreement. These weren't aspirational provisions. They had teeth — breach triggered an acceleration of the earnout at target.

Just over a year after closing, the buyer's new leadership decided to fold the division into a larger business unit. The attempted restructuring triggered acceleration. My client got paid at target.

When I negotiate an earnout, I'm thinking about what it looks like when someone tries to restructure around it. That's the only way to draft one that works.

The Practice

Most deals fall between $5 million and $250 million. I've closed at $1 billion+. I'm lead counsel on every transaction. If anyone else touches paper, I supervise it. Hourly or scoped-fee engagement, depending on the deal. In this band there is no second team. The lawyer on the deal is the deal team.

Business owners heading into a sale: I get in before the LOI and keep the exit from being redesigned in the purchase agreement.

PE sponsors running add-ons: I execute at the pace your deal calendar demands without the overhead of a large firm.

Corporate development teams needing surge capacity: I plug in, run the deal, and step out when it closes.

If a draft LOI is sitting in your inbox, send it to me. I'll tell you what I'd change before you sign.

Past results do not guarantee a similar outcome.

About the Author: Ian R. Cohen is the founder of IRC Legal, a boutique law firm on Long Island offering strategic M&A counsel and fractional General Counsel services. 17+ years of experience. 500+ closed transactions. $3B+ in aggregate deal value. He came up through Schulte Roth & Zabel and BakerHostetler, served as in-house General Counsel of a PE-backed company through nine-figure financings and a public-market process, and built IRC Legal around direct, senior-level deal execution.