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The Question You Need to Ask a Buyer Before Signing an LOI

Sep 10
2 min read
5 Questions for Former Sellers Graphic with hand holding a phone
Sellers who do reference work walk into diligence with clear eyes.

Before you sign an LOI, ask the buyer for a list of three owners they have already acquired. Then call them. Not the buyer's CFO. Not the intermediary. The founder who stood exactly where you are standing a few years ago.


After 300 closed transactions, the pattern for us still holds. Sellers who do reference work walk into diligence with clear eyes. The IT ExchangeNet clients who skip it get surprised in month four, when the surprise is expensive.


The data backs the caution. Axial's Dead Deal Report on 2025 broken LOIs, covering 75 failed transactions, found 25.3 percent died on diligence findings outside the quality of earnings, 21.3 percent on QoE and EBITDA discrepancies, 14.7 percent on renegotiation, and 13.3 percent on the seller's own decision to walk away. Almost every one of those is a behavior pattern, and behavior patterns repeat. The last three sellers already lived through yours.


On earnouts, a recent report states only 60 percent of private deals with earnouts see any payout, and roughly 21 cents of every promised dollar actually gets paid across the population. On people, research at MIT Sloan spanning approximately 4,000 acquisitions found 33 percent of acquired employees leave within the first year, against 12 percent of comparable direct hires.


Five questions to ask every former seller:


  1. Did the price at closing match the price in the LOI, and if it moved, what moved it?

  2. Did your earnout pay as modeled, and who controlled the numbers it was measured against?

  3. What happened to your people in the first 12 months, and were the commitments made to them honored?

  4. How much autonomy did you keep, and how fast did systems, branding, and reporting change?

  5. Knowing what you know today, would you sign with this buyer again?


Then listen for the pause. A serious acquirer offers references before you ask for them. A buyer who resists the request has already answered it.


Relationships count. Credibility counts. In this market a reputation is earned one closing at a time, and it travels faster than any pitch deck.

Looking to learn more about M&A and working with an advisor? Contact our team here.

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