“The 90 days after signing an LOI determine your actual closing price. Operate at full capacity, manage working capital deliberately, and disclose anything material the moment it happens.”
Why the LOI-to-Close Period Matters Financially
The period between LOI signing and closing is not a done deal — it's a conditional commitment. The purchase price in the LOI is typically subject to: working capital adjustment at closing, continued satisfaction of the seller's representations (including financial condition), and no material adverse change before close. This means that operational performance during the 60–120 days between LOI and close directly affects the final proceeds. Sellers who relax after signing an LOI and allow the business to drift — spending less on marketing, deferring maintenance, running down receivables, delaying payables past due dates — often discover at closing that working capital adjustments and declining TTM numbers have eroded their final price.
Operate as if the LOI Hasn't Been Signed
The best posture during the LOI-to-close period: run the business exactly as you would if there were no pending sale. This means: continue marketing and new customer acquisition at your normal pace. Maintain service quality standards — this isn't the time to let callbacks pile up. Keep collections current — accounts receivable aging is a working capital factor. Continue vendor payments on normal schedules. Don't make any operational changes (technology implementations, staff changes, pricing adjustments) without buyer awareness. Buyers conduct post-LOI due diligence with access to your real-time financials and operations. A company that is visibly in 'wind-down' mode during this period signals either seller fatigue or worse — active financial management to extract cash before close.
Cash Extraction: What's Allowed and What Isn't
Sellers naturally think about maximizing cash before closing — taking owner distributions, reducing operating expenses, running down inventory. What's permissible: taking normal owner distributions consistent with historical patterns is generally acceptable and expected. What creates problems: accelerating collections beyond normal pace specifically to build cash before close (the working capital adjustment will claw this back). Deferring payables beyond normal due dates to temporarily improve cash position (buyers see aging payables on the closing statement). Running down chemical inventory below normal operating levels (inventory is a working capital asset the buyer expects to inherit at normal levels). Making capital expenditures or taking distributions that are outside normal operating patterns without notifying the buyer. In most purchase agreements, the seller is required to operate in the ordinary course of business between signing and close.
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Working Capital Targets: The Financial Alignment That Matters
The working capital adjustment at closing settles based on the actual working capital delivered vs. the agreed target. During the LOI-to-close period, manage your working capital position to deliver at or near the target: (1) Monitor accounts receivable — collect outstanding balances to keep aging current. Aged receivables reduce working capital. (2) Process all vendor invoices and payables in the normal course — unduly delaying payables looks like financial management and creates liability overhang. (3) Maintain normal inventory levels — chemical supply inventory should be at typical operating levels, not run down to near zero. (4) Reconcile bank accounts regularly so the closing statement preparation is straightforward. Sellers who actively manage toward the working capital target — rather than passively hoping the closing statement comes out right — almost always have smoother closings.
Personnel Decisions During LOI-to-Close
The LOI-to-close period is not the time for significant personnel changes. Most purchase agreements require buyer notification and consent before making material personnel decisions: hiring, terminating, or materially changing compensation for any employee. Sellers who quietly lay off employees or make compensation changes during this period without buyer consent are likely breaching their representations. Conversely, sellers who know they need to add a technician or replace a departing employee should discuss the decision with the buyer before acting. The buyer has a legitimate interest in the staffing configuration they're inheriting — the team at closing is the team they're paying for. Any change from what was represented in the CIM warrants a conversation.
Communication with the Buyer During Due Diligence
The LOI-to-close period involves intensive buyer due diligence — document requests, financial reviews, management calls, site visits. Seller communication principles during this period: (1) Respond promptly to due diligence requests — delays create suspicion and extend the timeline. (2) Disclose any material adverse developments immediately — if you lose a major account, a key employee resigns, or a regulatory issue surfaces, notify the buyer the same day. (3) Don't misrepresent anything under due diligence pressure — if a question exposes an issue you hadn't disclosed, acknowledge it and provide context rather than minimizing it. (4) Keep your attorney informed of anything significant — some developments trigger disclosure obligations under the purchase agreement. The LOI-to-close period tests both parties' good faith. Sellers who communicate transparently and operate the business cleanly close faster and with fewer last-minute conflicts.
Jason Taken
Pest Control Business Broker · HedgeStone Business Advisors
Jason specializes exclusively in pest control company acquisitions and sales. He works with sellers across 34 states and buyers ranging from owner-operators to private equity platforms.