You have a letter of intent in your inbox.
A private equity firm — or a strategic buyer — looked at your HVAC business and decided it's worth making an offer. They've put a number on paper. This is a big moment.
It's also the beginning of the most dangerous 90 days of your professional life.
The LOI is not a done deal. The price is not locked. The terms are not final. What happens between now and closing will be determined by how prepared you are, how well you run the business during due diligence, and whether you understand the playbook the buyer is running on you.
This post is your map.
1. What an LOI Actually Means (and Doesn't)
An LOI — Letter of Intent — is an agreement to agree. It signals that both parties are serious, that you've reached a preliminary understanding on price and structure, and that you're ready to move into the formal process.
Typically Binding
- Exclusivity — 60–90 days, no talking to other buyers
- Confidentiality — deal terms and business info stay private
- Break fees (sometimes) — $100K–$500K if either party walks without cause
NOT Binding
- The valuation number
- Deal structure (stock vs. asset sale)
- Earnout terms
- Reps & warranties
- Working capital adjustments
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Once you sign the LOI, you're locked in. For 60 to 90 days (sometimes 120), you can't talk to anyone else. You've handed the buyer the leverage.
Here's what sophisticated buyers do with that leverage:
They create fatigue.
The due diligence process involves dozens of document requests, site visits, financial reviews, and legal reviews — all running simultaneously, all requiring your attention and cooperation. Responding to a 200-item diligence request list while also running your business is exhausting by design. A tired seller is a compliant seller.
They use findings to chip the price.
Every issue uncovered becomes a negotiating chip. QofE finds an add-back they won't credit? Price drops. Working capital misses their target? Price drops. Environmental finding? Price drops — or deal dies.
The Real Cost of Showing Up Unprepared
3. Step-by-Step: What Happens From LOI to Close
Here's the typical timeline from LOI signature to wire transfer. Note that these phases run in parallel — legal diligence is often happening while the QofE is still active.
Week 1–2
Deal Prep
Engage your M&A attorney. Set up your virtual data room (VDR). Organize financial docs, contracts, licenses, and employment agreements. Your first impression starts here.
Week 2–4
QofE Begins
Buyer's accounting firm (often Big 4 or regional advisory) audits your EBITDA. They verify every add-back, test revenue quality, review margins, and check working capital. This is the single most consequential phase.
Week 4–8
Legal Due Diligence
Attorneys review every contract, lease, license, employment agreement, litigation history, and UCC filing. Undisclosed liabilities surface here.
Week 6–10
Operational Diligence
Site visits. Fleet inspection. Customer interviews. Management team meetings. They're checking if the business actually works the way you described it.
Week 8–12
Purchase Agreement
The lawyers draft and negotiate the actual transaction document — reps and warranties, indemnification, earnout mechanics, escrow terms. Often the longest and most contentious phase.
Week 10–14
Final Close
Both parties sign. Wire transfer executes. Transition period begins. The deal is done.
Important reality check: 20–30% of deals that reach LOI do NOT close. Most unravel in weeks 3–8 when due diligence surfaces problems — or when price chips accumulate past the seller's walk-away number. Knowing this going in helps you make clear-eyed decisions about when to fight and when to move on.
For a broader overview of the entire PE sale process, see how a PE sale actually works from first contact through closing.
4. The 5 Ways Deals Die After LOI
These are the five deal-killers that show up most often in HVAC acquisitions after LOI. Know them ahead of time.
QofE finds add-backs the buyer won't accept
You've run owner-related expenses through the business for years — legitimate add-backs. But when documentation is missing, PE accountants haircut them. A $150K add-back haircut at 7x is a $1.05M price reduction. Some sellers accept it. Others walk. Either way, the LOI price is gone.
Customer concentration revealed
One customer is 25% of your revenue — a loyal relationship you've had for 12 years. From a PE underwriting perspective, it's existential risk. Buyers either reprice (lower base + earnout tied to retention) or walk. Over 20% in one customer is a red flag.
Key employee departure during diligence
Your service manager hears rumors about the sale and accepts a competing offer. The day you tell your buyer that your GM just gave notice, deal dynamics change. Buyers lose confidence. Price gets revisited. Sometimes the deal dies.
Environmental liability discovered
Old refrigerant disposal records. Improper handling documentation from five years ago. A prior EPA inquiry. PE environmental consultants find these things. The liability doesn't have to be large in dollars — buyers won't absorb open-ended environmental exposure.
Owner burns out and accepts bad terms
After 10 weeks of document requests, late-night legal calls, and having your business picked apart, the psychological weight is real. Sellers who reach week 10 exhausted often accept a lower price, a larger earnout, or worse indemnification terms just to be done. The buyer has been waiting for this moment.
5. What PE Buyers Are Actually Checking in the Final Stretch
By weeks 8–12, the financial audit is wrapping up and the buyer's team is forming their final conviction. Here's what they're actually asking internally:
Do the financials match what we underwrote?
If your QofE EBITDA is more than 5–10% below the LOI assumption, expect a price conversation.
Is the management team intact and motivated to stay?
If two key people have left or seem disengaged, post-acquisition risk increases significantly.
Are there any undisclosed liabilities?
Surprises destroy trust. Known issues disclosed early can be managed. Surprises at week 9 kill deals.
Is the revenue recurring or project-based?
Project revenue gets underwritten at a discount. If your mix shifted toward project work since the LOI, expect that to surface in the purchase agreement.
What's the real owner dependency?
Will the business run without you in 6 months? This question gets specific at close — the answer shows up in escrow terms and earnout structure.
For a deep dive on owner dependency specifically, read how to prepare your HVAC business for a PE sale in 12 months.
6. Your Job During Due Diligence
Six things that separate sellers who close at their LOI price from sellers who give it back:
Run the business like you're not selling.
Revenue, technician capacity, customer satisfaction — all of it should run at or above the level it was when the LOI was written. Every dip is a data point the buyer uses.
Respond to data requests within 24 hours.
Speed signals organization and control. Delays signal disorganization — or worse, that something is being assembled instead of retrieved.
Don't volunteer problems — but don't hide them.
Known issues that surface in due diligence are manageable. Hidden issues that surface are deal-killers and legal exposure.
Keep your management team focused and informed.
Your team will notice something is happening. Vague silence breeds rumor. Give your key people enough context to stay focused and stable.
Have your M&A advisor buffer ALL direct buyer contact.
Nothing good comes from talking directly to the buyer's team without representation. The buyer has professional negotiators. You need a buffer.
Know which terms matter most to you.
Before you're in the room, decide: what would you walk away over? Price floor? Earnout size? Indemnification cap? Knowing your line ahead of time is the difference between negotiating and reacting.
For guidance on finding the right advisor to run this process, see how to find the right M&A advisor for your HVAC sale.
7. The Earnout Trap
Many LOIs include an earnout — a deferred payment tied to post-close performance. The headline looks attractive: “additional $500K if EBITDA hits $X in the 12 months post-close.”
Here's the problem: after close, the buyer controls the business and the accounting.
They control which expenses get allocated to your division. They control how integration costs are booked. They control when to make capital investments that depress short-term EBITDA. Earnouts fail to pay out at roughly a 70% rate across M&A transactions.
The Earnout Math You Need to Know
Cash at close is worth more than cash-maybe in 12 months. Push to replace earnout dollars with close price dollars wherever possible.
If your LOI includes an earnout, negotiate it on these terms:
8. Know Your Number Before You Negotiate
If there's one thing you should do before you sit across the table from a PE firm's deal team, it's this: understand your own EBITDA, what multiple the market is paying for businesses at your scale, and what a reasonable walk-away number looks like.
Sellers who know their number walk into diligence with a clear floor. They can evaluate price chips against a baseline. They can identify when post-LOI adjustments cross the line from normal deal negotiation into something they shouldn't accept.
Sellers who don't know their number anchor on whatever the LOI says — which was the buyer's opening position, not yours.
And when you're building your due diligence file, the HVAC business due diligence checklist covers every document category PE buyers will request — organized by phase and with the specific reason each item matters.
The LOI was the beginning, not the end. The next 90 days will be won or lost by how prepared and how steady you are. Start there.
Before You Sit Across From a Buyer
Know Your EBITDA Multiple and PE Readiness Score
Run the free OffRamp calculator to get your estimated valuation range and see exactly where you stand before any LOI negotiation or due diligence process begins.
Calculate My HVAC Valuation — FreeFrequently Asked Questions
How long does the LOI to close process take for an HVAC business?
Most HVAC business transactions take 90 to 120 days from LOI signing to close, assuming no major issues surface in due diligence. Well-prepared sellers with organized VDRs and clean financials can close in 90 days. Sellers who are scrambling to produce documents, or where significant issues emerge in the Quality of Earnings audit, often see timelines stretch to 120–150 days — or stall entirely.
Can I negotiate after signing an LOI?
Yes — the LOI is not binding on price, structure, or deal terms. In practice, most negotiation happens during and after the due diligence process as the buyer's QofE report surfaces adjustments, working capital targets get set, and the purchase agreement is drafted. The key is to know going in that the LOI price is a ceiling, not a floor, and to have your M&A advisor manage all buyer contact so you're negotiating from strength.
What is a Quality of Earnings report?
A Quality of Earnings (QofE) report is an audit conducted by the buyer's accounting firm — typically a Big 4 or regional advisory firm — that independently verifies your EBITDA from the ground up. They trace every add-back to supporting documentation, test revenue recognition, review margin trends, and assess working capital normalization. On a 7x deal, a $100K EBITDA reduction in the QofE = $700K off your purchase price.
What percentage of HVAC business deals die after LOI?
Approximately 20–30% of deals that reach LOI stage do not close. Most fall apart during weeks 3–8 of due diligence when the QofE, legal review, or operational assessment surfaces material issues — or when price chips accumulate past the seller's walk-away number. The best mitigation is thorough preparation before the LOI is signed.
OffRamp is a free valuation tool for HVAC business owners. We don't sell your information, represent buyers, or work on commission. The calculator and reports are educational tools — always consult a licensed M&A advisor before entering a sale process.