Handling Material Changes Inside a Company During an LOI Exclusivity Period

A founder in our group signed an LOI a few weeks back. The deal is contingent on the buyer's funding coming through, so nothing is guaranteed, and the process is expected to run another month and a half if everything goes smoothly. In the meantime she's uploading documents into a virtual data room and fielding calls to go over more of them.

• The deal isn't final, it's contingent. Everything hinges on the buyer's funding actually coming through, so nothing is guaranteed yet.
• The data room work is mechanical. Uploading documents and answering follow-up calls is tedious but not what's actually stressful.
• One vague clause is doing all the damage. Standard boilerplate language that the company "shouldn't make material changes" during exclusivity.

That phrase sounds precise until you try to apply it to your actual to-do list. She had a website redesign she was overdue on, quoted around eighteen thousand dollars with a vendor she'd already vetted. She was also thinking about finally putting feelers out for a new salesperson, something that's normally a slow-burn hire that takes a while to ramp up regardless of when you start it.

• A website refresh she was already overdue on. Quoted at roughly $18,000 with a vendor she'd already vetted.
• A new sales hire she was ready to start sourcing. A slow-burn role that takes a while to ramp up no matter when you start it.
• Neither felt like what the clause was written to stop. But she didn't want to guess wrong on a deal she genuinely cared about closing.

That tension, wanting to keep running the business normally while a clause with vague language hangs over every decision, is more common than most first-time sellers expect.

• An LOI process is a distraction even when it's going well. Data room requests and diligence calls compete with actually running the company.
• There's a quieter psychological trap too. It's tempting to start treating the company as already sold and mentally checking out of routine decisions.
• A signed LOI isn't a closed deal. The gap between the two can be weeks or months, longer still if financing falls through and you're back to running an independent company.

What "Material Changes" Actually Means

The clause almost never means what it sounds like it means on a literal reading. In practice, "material changes" is shorthand for adverse material changes, meaning decisions that would meaningfully alter the shape of the deal the buyer thought they were getting.

• Hiring a good salesperson in good faith isn't that. The clause targets deal-shape risk, not ordinary growth decisions.
• When in doubt, just ask. Tell the buyer what you're planning and confirm they're fine with it; one email resolves more anxiety than an hour of guessing alone.

What the clause is actually protecting against tends to be a narrower, more specific list of moves, the kind of thing that changes your balance sheet or your legal obligations in a way the buyer didn't underwrite.

• Taking on new debt. Anything that adds liabilities the buyer wasn't expecting to inherit.
• Selling equity. A change in ownership structure changes what the buyer is actually acquiring.
• Multi-year vendor contracts. Locking in long-term obligations the new owner would be stuck honoring.
• Bank financing changes. Anything that touches your credit facilities or lending relationships.

Notice that a website refresh and a new sales hire aren't on that list. That's not an accident. Those clauses are written by lawyers thinking about balance sheet and capital structure risk, not day-to-day operating decisions.

The Test That Actually Matters: Would You Need This Either Way?

One member offered a framework that cuts through most of the ambiguity here. He'd been through this exact stretch himself, LOI signed, staying on with an employment agreement post-close, and he'd faced the identical question about whether to spend on things like a website update during the waiting period. His test was simple: if the deal collapses, will you regret not having done this? And if the deal closes, will you still need it?

• If the deal falls through, will you regret skipping it? A website you'll need regardless is a yes; a project you'd only do to impress this specific buyer is a no.
• If the deal closes, will you still need it? If both answers are yes, do it now instead of freezing for months waiting on someone else's financing.
• Size still matters. A modest, needed expense clears the bar easily; a project big enough to change the calculus is worth waiting on until after close.

Applied to the eighteen-thousand-dollar website quote, his answer was a clear yes.

• $18,000 clears the bar easily. You need the updated website whether or not this deal closes, and that figure isn't enough to spook a buyer if the deal fell through.
• $200,000 would change the calculation. Both because of the size of the spend and because a project that large is worth waiting on until after close to tackle properly.

Run It Like Nobody's Ever Going to Buy It

Another member framed the whole period with a line worth keeping on an index card: build your business like you're going to sell it, and run it like nobody's ever going to buy it.

• It's still your business until the wire hits. The LOI doesn't change ownership or authority, no matter how far along the process feels.
• Freezing decisions hands the buyer an advantage they didn't earn. Six to eight weeks of paralysis on a deal contingent on someone else's financing weakens your position if it falls through.

The one thing worth watching for, in his experience, is decisions that are obviously correct for the long-term health of the company but that dent short-term EBITDA in a way a buyer might notice and start renegotiating around. His approach there is proactive communication rather than either silence or asking permission.

• State it plainly. "This is a no-brainer decision, I intend to move forward, I wanted you aware it may affect short-term financials, but it's right for the business."
• Give them a real chance to object. If they push back without a substantive reason, that's useful information about who you're dealing with.
• Keep driving until the ink is dry. "If you want to close sooner, it's your train. If you want to keep studying the data, I'm still driving, and I'll keep you informed, but I'm not taking direction yet."

Communicate More Than Feels Necessary

The consistent thread across everyone's advice was to err toward more communication with the buyer, not less, and to make it easy rather than formal.

• A phone call works. So does a short email that just states the plan: "planning on hiring a salesperson and moving ahead with the website refresh, wanted to keep you in the loop."
• What you're avoiding isn't the decision. It's the buyer finding out about a meaningful change secondhand, or worse, discovering it during due diligence and wondering what else they don't know about.

There's a real tension in this stretch of a deal worth naming honestly. You're being told, correctly, not to make material changes, while also being expected to keep running a healthy, growing business, because a business that goes quiet for two months looks worse in diligence than one that kept moving.

• A short list to genuinely avoid without asking. New debt, equity sales, long-term vendor lock-ins, financing changes.
• A much longer list to just keep doing. Every ordinary operating decision a good operator would make regardless of the deal.
• The difference is disclosure, not permission. Tell the other side what you're doing before they have to ask, rather than waiting to be told what's allowed.

It also helps to remember what the buyer's side is actually worried about when they write that clause into the LOI in the first place.

• They're not worried about your website. They're worried about waking up after close to a business that isn't the one they diligenced.
• The fear is specific: debt, equity, a surprise lease. Something signed the week before closing that changes what they thought they were buying.
• Seen through that lens, most anxiety evaporates. Ordinary operating decisions were never what the clause was written to catch.

If you're in exclusivity right now and staring at a decision you're not sure about, the fastest way through it usually isn't more analysis. It's a two-line email to the buyer that states what you're doing and why, sent before you do it rather than explained after. Most of the time you'll hear back nothing more than a thumbs up, and you'll have spent five minutes instead of a sleepless week wondering whether you were allowed to hire a salesperson, worrying over a clause that was mostly just waiting for someone to say the plan out loud.