A letter of intent feels like the finish line. After years of positioning the business for transition, it is the first piece of paper that makes a sale feel real. It is tempting to treat signing it as the hard part being over.
It is not. It is a point when some planning options may begin to become more limited.
While the terms of an LOI can vary, signing one often establishes important deal terms, timelines, and expectations. Certain planning strategies that may affect an owner’s personal financial outcome are best considered before an LOI is signed. Once the deal is in motion, planning opportunities can become more limited or unavailable.
Here are three questions worth answering before signing on that dotted line.
1. What does this deal structure actually do to my personal number?
An LOI describes purchase price, but purchase price is not the only number that matters. What matters is what lands after taxes, transaction costs, and any rollover equity, earnout, or seller note is accounted for. Does that number actually fund your unique goals on the other side?
Cash at close, an earnout tied to performance, and equity that rolls into the new entity are not interchangeable dollars. Each carries different tax treatment, different timing, and a different risk profile. An owner who has not weighed these structures against their personal funding need may be negotiating without a complete understanding of how the deal supports their financial goals.
This is where a wealth advisor can provide an important perspective alongside the investment banker and other professionals. The banker is optimizing deal value. Someone else needs to be running that value through the owner’s actual balance sheet before the structure is finalized.
2. Which planning opportunities could become more limited after I sign?
Certain planning strategies may be more effective or only available before a transaction is in motion.
Gifting or estate planning around share value, done while the valuation is still lower and more flexible. Roth conversions timed against income in years before a high-income sale event. Restructuring a concentrated equity position before it converts into a concentrated cash position. Charitable giving sequenced ahead of the largest taxable event of the owner’s life, not after it.
Depending on the scope of their engagement, individual transaction professionals may focus primarily on their respective areas of expertise. They are each doing their piece of the transaction. Without coordination among advisors, important pre-signature planning considerations could be overlooked.
3. Who is coordinating my side of the table?
An LOI touches legal, tax, and personal finance simultaneously, and coordination among those advisors can be important to understanding the transaction’s broader impact on the owner. The attorney is reviewing terms. The CPA is modeling this year’s return. The banker is protecting valuation. Each of them is doing good work in their lane, but none of them owns the intersection.
That intersection is where a wealth advisor can add valuable perspective. Not brought in after close to manage the proceeds, but at the table before the LOI is signed, translating deal terms into personal impact and highlighting the opportunities that are still available.
The Real Question Behind All Three
Every one of these questions comes back to the same thing: an LOI is a business decision that can have significant personal financial consequences, and the personal side deserves its own seat at the table before the ink dries, not after.
A great deal on paper and a secure life on the other side of it are related outcomes. They are not automatically the same outcome. Addressing these questions early may help an owner better align the transaction with their broader financial goals.
________________________________________________________________________________________________________________
Apollon Wealth Management, LLC (“Apollon”) provides advice and make recommendations based on the specific needs and circumstances of each client. For clients with managed accounts, Apollon has discretionary authority over investment decisions. Investing involves risk and clients should carefully consider their own investment objectives and never rely on any single chart, graph, or marketing piece to make decisions. The information contained herein is intended for information purposes only, is not a recommendation to buy or sell any security and should not be considered investment, tax, or legal advice. See Apollon’s Form ADV Client Disclosure Brochure for information about risks and considerations relating the services offered through Apollon. This is available on our website, www.apollonwealthmanagement.com.
