How to Run Your Business While Under LOI Without Losing Momentum: 2026 Guide

By Christoph Totter, CT Acquisitions Managing Partner. Last reviewed: July 2026.

How to run your business while under LOI is the operational question that determines whether a signed letter of intent becomes a closed deal or a broken process. Between LOI signing and closing, sellers typically operate under ordinary-course-of-business covenants that restrict material decisions without buyer consent, while still needing to hit the numbers modeled in the deal. This guide walks through the covenant mechanics, the consent thresholds you can expect, the decisions you can make freely versus the ones that require buyer sign-off, and the operating rhythm that keeps the business defensible and the deal on track through the sixty to one hundred twenty days between signing and closing.

Executive summary

• Post-LOI operating conduct is governed by ordinary-course-of-business covenants, described in the American Bar Association Private Target M&A Deal Points Study as a near-universal feature of definitive agreements.
• Delaware Chancery has treated ordinary-course covenants as substantive obligations, notably in AB Stable VIII LLC v. MAPS Hotels and Resorts One LLC (Del. Ch. Nov. 30, 2020), where a seller’s pandemic-era operational changes were found to breach the ordinary-course covenant.
• Typical capex consent thresholds land in the $50,000 to $500,000 range for lower-middle-market deals, per Sidley Austin M&A alerts covering interim operating covenants.
• Hiring above defined seniority (VP and above is common) and non-ordinary compensation changes typically require written buyer consent, per Wilson Sonsini M&A commentary.
• The ABA M&A Committee Model Stock Purchase Agreement with Commentary is the reference practitioners rely on for standard covenant language.
• Broken-deal rates for signed LOIs in the lower middle market would range in the 15 to 30 percent band based on Axial deal-flow reporting and GF Data M&A Report commentary on post-LOI attrition.
• Documented ordinary-course logs and written consent memos would materially reduce indemnification and MAE-clause risk, per Weil Gotshal & Manges practitioner commentary.

Key findings

1. Between LOI signing and closing, the seller has two masters: run the business well enough to hit the model, and avoid material changes that could trigger buyer walk-away or price reduction, per ABA Private Target Deal Points Study.
2. Ordinary-course covenants typically appear in the LOI as a placeholder and in the definitive purchase agreement in operative form, per Sidley Austin M&A alerts.
3. Ordinary course means consistent with past practice, not “reasonable” in the abstract. The AB Stable opinion held that even reasonable pandemic-era operational changes breached the covenant because they were inconsistent with past practice.
4. Capex thresholds for consent typically land at $50,000 to $500,000 depending on target size, per Sidley Austin interim-covenant commentary.
5. New material contracts outside the ordinary course, defined by duration and dollar value in the definitive agreement, typically require written buyer consent, per Wilson Sonsini.
6. Hiring above a defined level (director, VP, or C-suite) and terminating key employees typically require buyer consent, per Weil Gotshal & Manges M&A practice commentary.
7. Distributions, dividends, and shareholder loans are almost always prohibited or subject to a defined cap between signing and closing, per the ABA M&A Committee.
8. Accounting method changes and working capital manipulation are prohibited because they would distort the closing net working capital true-up, per Deloitte M&A Transaction Services commentary.
9. Sellers who maintain a weekly operating review with their advisor and a written consent log would materially reduce the risk of indemnification claims post-closing, per Latham & Watkins M&A commentary.
10. The “buyer-brain trap” (seller mentally disengaging or over-optimizing for the buyer’s future preferences at the expense of current operations) would be the single most common cause of missed forecasts between signing and closing, per practitioner commentary from Axial Forum content on post-LOI seller behavior.

What “ordinary course of business” actually means

Ordinary course of business is the legal and operational standard that governs seller conduct between LOI signing and closing. It does not mean “reasonable business judgment,” and it does not mean “whatever a prudent operator would do.” It means consistent with the target’s own past practice. The Delaware Chancery Court’s opinion in AB Stable VIII LLC v. MAPS Hotels (Nov. 30, 2020) held that a hotel operator’s decision to close properties and lay off staff during the early COVID-19 shutdown, while operationally reasonable, breached the ordinary-course covenant because those actions were inconsistent with how the business had historically been run. The buyer walked from a $5.8 billion deal, and the ruling was affirmed by the Delaware Supreme Court in December 2021, per the Delaware Supreme Court opinion in AB Stable VIII LLC v. MAPS Hotels.

The practical implication for a lower-middle-market seller is that any operational change that would look novel against the trailing twelve to twenty-four months of the target’s own history requires either written buyer consent or a defensible written record explaining why it fits within past practice. Reasonableness is not a defense. Consistency with past practice is.

Where the covenant lives

The interim-operating covenant typically appears in Article 5 or 6 of the definitive purchase agreement, per the ABA M&A Committee Model Stock Purchase Agreement structure. In the LOI itself, the covenant usually appears as a one-paragraph placeholder committing the seller to operate in the ordinary course and to negotiate a full interim-operating covenant in the definitive agreement. Even at the LOI stage, that placeholder is legally binding on the seller for the exclusivity period.

Decisions you can make freely versus decisions that need buyer consent

Ordinary-course covenants create three practical buckets: decisions the seller makes unilaterally, decisions requiring written buyer consent, and decisions that are outright prohibited. The specific thresholds are negotiated in the definitive agreement, but the following ranges reflect typical lower-middle-market practice, per Sidley Austin and Wilson Sonsini M&A commentary.

Decision category	Typical LMM threshold	Practitioner default
Capital expenditure, single item	$50,000 to $500,000	Consent required above threshold
New customer or supplier contract	12 months and $100,000 to $250,000	Consent above either dimension
New hire, individual contributor	Below director level	Free within budget
New hire, director or VP	Any	Consent required
Termination of key employee	Named schedule	Consent required
Compensation change, non-scheduled	Above 5 to 10 percent of base	Consent required
Distribution, dividend, or shareholder loan	Any	Prohibited or scheduled cap
Accounting method change	Any	Prohibited
Sale or lease of material assets	Above defined threshold	Consent required
Settlement of litigation	Above defined threshold	Consent required

Threshold levels are illustrative. The definitive agreement would set the actual numbers, and those numbers would be negotiated. Buyers push for lower thresholds. Sellers push for higher thresholds. Sellers with a mature interim-operating covenant would negotiate materiality thresholds that let them run the business without weekly buyer approval calls.

The three-bucket sort

A practical operating rhythm for the seller is to sort every proposed material decision into one of three buckets before executing. Bucket one is “clearly ordinary course, do it”: recurring supplier orders, replacement hires below the threshold, routine capex within budget, and pricing decisions within historical ranges. Bucket two is “gray area, memo the buyer”: a new customer contract above the dollar threshold but structured consistently with past customer contracts, or a replacement hire that is at the borderline level. Bucket three is “outside ordinary course, request written consent”: any capex above threshold, any executive hire, any change to compensation structure, or any transaction with a related party.

The weekly operating review

Sellers who close cleanly typically run a weekly operating review with the M&A advisor between LOI signing and closing. The purpose of that review is to surface proposed decisions early enough to route them through the correct bucket, document the ordinary-course reasoning, and prepare consent requests where needed. Practitioner commentary from Weil Gotshal & Manges M&A practice notes describes weekly cadence as the operating norm for mid-cap and lower-middle-market transactions where interim-operating risk is meaningful.

The weekly review typically covers pipeline and revenue, gross margin and cash, headcount and hiring pipeline, capex plan, customer or supplier changes, litigation and regulatory items, and any anticipated related-party transactions. The advisor’s role is to flag items in the gray or consent-required buckets and to draft the consent memo or ordinary-course rationale before the item lands on the buyer’s desk.

The written consent memo

When buyer consent is required, the standard practitioner artifact is a written consent memo. The memo describes the proposed action, the business rationale, the comparable historical actions demonstrating consistency with past practice, and the requested buyer response. The buyer’s counsel typically responds in writing within three to seven business days. Both the request and the response are retained in the deal file for indemnification defense post-closing, per Latham & Watkins commentary on interim-operating covenant compliance.

Hiring and firing while under LOI

Hiring during the interim period is one of the most operationally sensitive covenant categories. Most interim-operating covenants prohibit hiring above a defined seniority level (director, VP, or C-suite) without written buyer consent, and prohibit termination of any employee listed on a “key employee” schedule attached to the definitive agreement. Below the seniority threshold, replacement hiring for open roles is typically permitted if it is consistent with past hiring practice and within the approved budget, per Wilson Sonsini M&A alerts.

Two practical points sellers miss. First, “consistent with past practice” applies to timing as well as headcount. A seller who suddenly stops hiring for six months to boost EBITDA before closing would have a hard time arguing that hiring pause was ordinary course. Second, compensation changes outside the annual review cycle typically require consent even for junior employees, because compensation changes affect the closing balance sheet and the working capital true-up.

Retention bonuses and the closing bonus pool

Buyers typically want key employees retained through and beyond closing. That preference gets operationalized in one of two ways. Either the seller uses cash from operations (which reduces closing net cash and therefore purchase price under a cash-free debt-free structure) to pay retention bonuses, or the buyer funds a retention pool at closing. The buyer-funded pool is more common in deals where the buyer is a private equity platform with a management-retention playbook, per Mercer M&A talent commentary. Either structure requires disclosure of the retention plan in the definitive agreement and typically requires buyer consent for the specific award list.

Capex during LOI

Capital expenditure between signing and closing is one of the most negotiated covenant items. Buyers want to prevent sellers from either accelerating capex (which would stress-test the buyer’s balance sheet) or deferring capex (which would inflate free cash flow and disguise deferred maintenance). Sellers want flexibility to keep the business running.

The typical structure is a capex plan attached as a schedule to the definitive agreement, with a threshold above which any single item requires buyer consent. Threshold levels typically land at $50,000 to $500,000 depending on target size, per Sidley Austin interim-covenant commentary. Sellers who anticipate meaningful capex (equipment replacement, IT infrastructure, facility work) would front-load the discussion by including a detailed capex schedule with the definitive agreement so the buyer’s consent is prospective rather than transactional.

Deferred maintenance risk

The other side of capex during LOI is deferred maintenance. Sellers who cut capex to boost trailing-twelve-month EBITDA in the run-up to the LOI typically face buyer pushback in the quality of earnings review and price adjustments at closing. Quality of earnings providers routinely flag capex-to-depreciation ratios below one and normalize deferred maintenance into the run-rate model, per Deloitte and BDO Transaction Advisory commentary. For a deep dive on how quality of earnings interacts with these issues, our Quality of Earnings deep dive walks through the specific line items where post-LOI capex behavior shows up.

The buyer-brain trap

The single most common cause of missed forecasts between LOI signing and closing is what practitioners call the buyer-brain trap. The seller mentally disengages from operating the business, starts optimizing decisions for the buyer’s future preferences rather than current performance, or begins deferring decisions until “after closing.” The result is a business that misses its own forecast, gives the buyer a price-reduction lever, and in extreme cases triggers a Material Adverse Effect walk-right.

The AB Stable case, discussed above, is the extreme legal expression of the buyer-brain trap. The seller made changes it thought were operationally reasonable but that were inconsistent with past practice. The Delaware Chancery opinion is the leading modern statement of why buyer-brain behavior is a covenant breach even when it is well-intentioned.

Operationally, the buyer-brain trap typically shows up as: pausing sales pipeline development, deferring hard customer conversations, freezing hiring, cutting marketing spend, deferring capex, and delaying difficult personnel decisions. Each of those actions would flag on the closing quality of earnings review and would create a price-adjustment argument for the buyer. The advisor’s job during the interim period is to keep the seller running the business as if the LOI did not exist, subject only to the specific covenant restrictions in the definitive agreement.

Common covenant categories in the definitive agreement

Affirmative covenants

Affirmative covenants require the seller to do certain things. Typical items include: maintain the business in the ordinary course, preserve relationships with material customers and suppliers, maintain insurance, provide the buyer with reasonable access to books and records, notify the buyer of material adverse events, and use commercially reasonable efforts to secure required consents (regulatory, landlord, customer). The ABA M&A Committee Model Stock Purchase Agreement Article 6 is the practitioner reference.

Negative covenants

Negative covenants prohibit the seller from doing certain things without consent. Typical items include: no capex above threshold, no new material contracts above threshold, no hiring or firing above threshold, no compensation changes outside the ordinary course, no distributions or dividends, no accounting method changes, no sale of material assets, no incurrence of new debt above threshold, no settlement of material litigation, no related-party transactions, and no acquisitions or divestitures. These items are typically negotiated line by line in the definitive agreement, per Weil Gotshal & Manges commentary.

Access covenants

Access covenants require the seller to provide the buyer with reasonable access to management, employees, facilities, books, and records during the interim period. Buyers typically use this access to complete confirmatory diligence, integration planning, and, in private equity transactions, to prepare the operational hundred-day plan. Sellers should coordinate access requests through the M&A advisor to avoid duplicative asks and to protect employees from premature disclosure of the transaction.

The Material Adverse Effect clause

The Material Adverse Effect (MAE) clause is the buyer’s ultimate walk-right. It typically defines a threshold of business degradation between signing and closing that would allow the buyer to terminate without paying the reverse break fee. Delaware courts have historically set an extraordinarily high bar for MAE, requiring a durationally significant impact on long-term earnings power. The leading case is Akorn Inc. v. Fresenius Kabi AG (Del. Ch. Oct. 1, 2018), where the Chancery Court found for the first time that an MAE had occurred, based on a sustained collapse in Akorn’s business fundamentals and regulatory compliance failures.

Post-Akorn and post-AB Stable, sellers should assume that ordinary-course covenant compliance and MAE risk are functionally connected. A seller who breaches the ordinary-course covenant would provide the buyer with a route to walk that does not require crossing the higher MAE threshold. The Latham & Watkins M&A commentary describes this as the “AB Stable playbook” for buyers seeking to exit signed deals.

Pandemic and force majeure carve-outs

Post-2020 definitive agreements typically include specific MAE carve-outs for pandemics, epidemics, natural disasters, and force majeure events, with disproportionate-impact snap-backs. The result is that a pandemic-style event would not itself trigger MAE, but a pandemic that hits the target disproportionately relative to its peer set could trigger MAE. This structure is a direct response to the AB Stable ruling, per Skadden Arps M&A commentary.

Communication protocols during LOI

Internal communication

Employee communication during LOI is one of the most sensitive operational categories. Most deals are managed under strict confidentiality until closing or until specific pre-closing communication milestones. The seller’s leadership typically operates a “knowers list” of employees read in on the transaction (usually CFO, general counsel, and one or two operational executives), and the buyer’s diligence access requests are routed through that group.

Practitioner practice is to plan the employee-communication sequence well in advance of closing: a leadership announcement typically within a week of signing (if signing is publicly disclosed) or within a week of closing, followed by all-hands communication, followed by customer and supplier communication. Getting the sequence wrong (customers hearing before employees, employees hearing through rumor) would materially damage the operational continuity the buyer paid for, per Mercer M&A talent commentary.

Customer and supplier communication

Material customer and supplier communications during the interim period typically require buyer consent, because a poorly executed communication would materially affect retention. The typical structure is a joint buyer-seller communication plan approved as part of pre-closing conditions, with key customer meetings scheduled between signing and closing where both buyer and seller participate. For key customer consent items (assignment consents in change-of-control clauses), the M&A advisor typically manages the outreach to preserve confidentiality until closing is imminent.

Closing conditions the seller controls

Between signing and closing, several closing conditions are within the seller’s operational control. Missing any of them would allow the buyer to walk. Typical seller-controlled conditions include:

1. Bring-down of representations and warranties at closing (the reps have to remain true at closing subject to a materiality qualifier).
2. Compliance with pre-closing covenants (including the interim-operating covenant).
3. Delivery of required third-party consents (landlord, key customer, regulator).
4. No MAE.
5. Delivery of a closing certificate signed by an officer confirming the above.
6. In private equity transactions, delivery of employment or equity roll agreements from named executives.

The practical implication is that seller conduct during the interim period materially affects whether the deal closes. Sellers should treat each of these conditions as an operational objective on par with hitting the P&L forecast, per Gibson Dunn M&A practice commentary.

Working capital and the closing balance sheet

Interim-period seller conduct materially affects the closing working capital true-up. Under a standard cash-free debt-free structure, the purchase price is adjusted at closing for a target working capital (typically the trailing twelve-month average). If actual closing working capital is below target, the seller pays the shortfall. If above target, the buyer pays the excess, per PwC Deals Transaction Services commentary.

Sellers who mismanage working capital during the interim period (accelerating receivables collection, delaying payables, running down inventory) would face a closing adjustment even absent a covenant breach. Buyers routinely flag working capital acceleration in the quality of earnings review and adjust the target accordingly. The safe operating posture is to run working capital consistent with historical patterns and to document any deviations with a written business rationale. Our LOI template for sellers walks through the working capital true-up mechanics in more detail.

The closing balance sheet in practice

The closing balance sheet is typically prepared by the seller’s finance team within 30 to 90 days after closing, with a review right for the buyer. Disputes go to an accounting arbitrator (typically a Big Four firm not otherwise involved in the transaction). The typical dispute-resolution cost is $50,000 to $250,000 depending on scope, per Deloitte Transaction Services commentary.

Regulatory and licensing conduct during LOI

For businesses in regulated verticals (healthcare, financial services, environmental services, energy, transportation), the interim period is when the buyer completes regulatory filings and the seller supports transfer of licenses and permits. Any lapse in the seller’s regulatory posture during the interim period would flag on the buyer’s diligence and potentially trigger a closing condition failure.

Practitioners recommend the seller maintain a licensing and permits log throughout the interim period, with renewals scheduled well in advance and the buyer’s regulatory counsel included on any material regulatory communications. For healthcare transactions, this includes Medicare and Medicaid provider agreements. For financial services, this includes broker-dealer, RIA, or insurance licenses. For environmental services, this includes hazardous waste permits and RCRA compliance. The Skadden Arps M&A commentary covers the interaction between regulatory transfer filings and interim-operating covenants.

The month-by-month interim period playbook

Weeks 1 to 2 post-LOI

Advisor and legal counsel calibrate the diligence workstream, confirm the exclusivity window, confirm ordinary-course covenant scope for the exclusivity period, distribute the diligence tracker to management, and open the data room. Weekly operating review kicks off. The buyer’s diligence team typically begins commercial, financial, tax, and legal workstreams in parallel.

Weeks 3 to 6

Diligence workstreams accelerate. Quality of earnings provider (typically Big Four or specialty) is engaged by the buyer and works with the seller’s finance team. Definitive agreement first draft circulates. Interim-operating covenant language is negotiated. Consent memos begin flowing for gray-area operational items.

Weeks 7 to 10

Definitive agreement is finalized. Disclosure schedules are drafted (this is typically the most time-consuming late-stage workstream for the seller’s team, per Gibson Dunn commentary). Regulatory filings (HSR if applicable, industry-specific filings) are prepared. Third-party consent outreach begins for key customer change-of-control clauses.

Weeks 11 to 16

Signing of definitive agreement (in some structures, signing and closing are simultaneous; in others, signing precedes closing by 30 to 90 days for regulatory waiting periods). Post-signing period focuses on regulatory clearance, third-party consent completion, and satisfaction of remaining closing conditions.

Closing

Officer certificates delivered confirming covenant compliance, bring-down of reps, and no MAE. Funds flow. Escrow (if any) funded. Employee, customer, and supplier communications executed per the pre-approved plan. Post-closing working capital true-up commences.

Active buyers and their operational preferences during LOI

The buyer’s identity meaningfully affects the operational tenor of the interim period. Private equity platforms and strategic buyers behave differently. Family offices and search funds have distinct preferences again. Understanding your specific buyer’s operational patterns lets the seller and advisor calibrate the weekly operating review appropriately. Our Family office versus PE buyer guide and Strategic versus financial buyer guide cover the fundamental differences.

Private equity platforms

Private equity platforms typically enter the interim period with a defined hundred-day integration plan and a strong preference for management continuity. Consent requests for hiring and compensation changes are typically processed quickly if they align with the integration plan and slowly if they do not. Named PE platforms with public LMM buy-side activity include The L Companies, Main Street Capital, and PNC Capital Solutions. Each firm’s public portfolio pages document the size ranges and vertical preferences relevant to how they would engage during interim operating.

Strategic buyers

Strategic buyers typically enter the interim period focused on synergy realization and integration risk. Consent requests around customer contracts and supplier relationships are typically scrutinized closely because they affect the buyer’s integration plan. Public strategic buyer commentary is available in the SEC EDGAR filings of large public acquirers, including the risk factor and MD&A sections describing integration approach.

The two to three boutique M&A advisors who specialize in seller-side transitions

Sellers navigating the interim period between LOI signing and closing typically work with a sell-side M&A advisor who quarterbacks the process. Specialty M&A firms active in the lower-middle-market sell-side space include Raymond James Investment Banking, which maintains a middle-market M&A practice serving founder-owned businesses, and Harris Williams, a middle-market M&A firm active across industrials, healthcare, and business services. Both firms publish research and case studies documenting their sell-side process and their approach to interim-period operating discipline.

Another lower-middle-market option is CT Acquisitions, which specializes in $1M to $50M sell-side and buy-side transactions with an owner-aligned fee structure and a maintained bench of 100-plus vetted institutional buyers. Our M&A advisory practice covers full sell-side quarterbacking including weekly operating review during the interim period, consent-memo drafting, and ordinary-course-covenant compliance. Sellers evaluating advisor fit for post-LOI operating discipline would want to compare the weekly operating review cadence, the depth of covenant experience, and the fee structure (fixed retainer versus success fee only) across firms. Our M&A advisor fees 2026 guide covers the fee structures across the LMM segment.

How to choose an advisor for the interim period

Sellers evaluating advisor fit for the post-LOI interim period should test for the following capabilities:

1. Prior experience running weekly operating reviews between LOI signing and closing in the seller’s vertical.
2. Documented consent-memo templates and prior sample memos (redacted).
3. Familiarity with the ABA Model Stock Purchase Agreement covenant structure.
4. Prior experience with Delaware or comparable state Chancery court interim-covenant precedent.
5. Relationships with quality of earnings providers used by likely buyers in the seller’s vertical.
6. Fee structure that does not create misaligned incentives during the interim period (retainer plus success fee, not success-fee only, per our retainer guide).
7. Willingness to draft ordinary-course-covenant language in the definitive agreement in collaboration with the seller’s counsel.
8. Documented process for managing the “knowers list” and employee communication cadence.
9. References from prior sellers on interim-period operational discipline (not just deal closing).
10. Availability during the interim period (this is not a workstream the advisor can delegate to a junior).

Our M&A advisor versus business broker guide covers the fundamental structural differences that make M&A advisors better suited than transactional brokers for post-LOI operating discipline.

Frequently asked questions

Can I hire new employees while under LOI?

You can typically hire below-threshold individual contributors within your approved budget without buyer consent, as long as the hiring is consistent with past practice. Hiring at director, VP, or executive level typically requires written buyer consent, per Wilson Sonsini M&A commentary. The exact threshold is defined in the definitive purchase agreement.

Can I fire underperforming employees while under LOI?

Termination of employees below the “key employee” schedule is typically permitted if consistent with past practice and documented as performance-based. Termination of key employees requires written buyer consent. Buyers will scrutinize any pre-closing terminations closely because they affect the operational continuity the buyer paid for.

What capex can I make without buyer consent?

Capex below the defined single-item threshold (typically $50,000 to $500,000 in the LMM per Sidley Austin) and consistent with past-practice capex patterns is typically permitted. Capex above threshold or outside the approved capex schedule requires written buyer consent. Best practice is to attach a detailed interim-period capex schedule to the definitive agreement.

Can I take a distribution while under LOI?

Distributions, dividends, and shareholder loans are typically prohibited during the interim period, or subject to a defined cap in the definitive agreement. Sellers who want to take distributions before closing typically address this by negotiating a specific distribution schedule into the definitive agreement upfront, per Weil Gotshal & Manges practitioner commentary.

What happens if I breach an ordinary-course covenant?

Ordinary-course covenant breaches typically give the buyer either a closing condition failure (allowing the buyer to walk without paying the reverse break fee) or an indemnification claim post-closing. The AB Stable Delaware Chancery opinion is the leading modern statement of the seriousness of ordinary-course covenant breaches.

Can the buyer walk before closing?

The buyer’s walk-rights are governed by the closing conditions in the definitive agreement, typically including bring-down of representations and warranties, compliance with pre-closing covenants (including the ordinary-course covenant), no MAE, and receipt of required third-party consents. Any failure of a closing condition would let the buyer terminate. The seller’s protection is the reverse break fee, which requires the buyer to pay a defined amount for terminating without cause.

How long does the interim period typically last?

The interim period between signing and closing typically runs 30 to 120 days depending on regulatory waiting periods (HSR, industry-specific), third-party consent complexity, and financing conditions. Simple LMM transactions with no regulatory filings can sign and close simultaneously. Deals with HSR clearance would typically need 30 to 60 days.

Do I need to hit my monthly numbers during LOI?

Yes. Missing the run-rate financial performance modeled in the LOI would give the buyer a price-reduction argument at closing, would potentially trigger an MAE argument, and would provide indirect evidence of an ordinary-course covenant breach. The safe operating posture is to hit or exceed the numbers, communicate any variance to the buyer proactively with a documented business rationale, and maintain the operating discipline the business had before the LOI was signed.

Methodology and data sources

This guide synthesizes practitioner commentary and case law from primary sources including the American Bar Association M&A Committee Model Stock Purchase Agreement with Commentary, the ABA Private Target M&A Deal Points Study, Delaware Chancery Court opinions on interim-operating covenants including AB Stable VIII LLC v. MAPS Hotels and Akorn Inc. v. Fresenius Kabi AG, published practitioner commentary from Sidley Austin, Wilson Sonsini, Weil Gotshal & Manges, Latham & Watkins, Skadden Arps, and Gibson Dunn, transaction advisory commentary from Deloitte, PwC Deals, and BDO Transaction Advisory, talent commentary from Mercer M&A, and deal-flow commentary from Axial Forum and GF Data. Public deal precedent references are drawn from the SEC EDGAR filings system.

This guide is not an appraisal, not investment advice, not legal advice, not tax advice, not financial advice, and not a prediction. Every seller’s interim-operating covenant is defined in a specific definitive purchase agreement negotiated with a specific buyer under the law of a specific jurisdiction. Sellers should consult transaction counsel qualified in the applicable jurisdiction and a licensed M&A advisor before making operational decisions with covenant implications.