LOI to Closing: The Deal Attorney's Diligence Timeline

LOI due diligence is the structured investigation period between signing a letter of intent and closing an M&A transaction. It is where deal attorneys identify the legal, financial, and operational risks that will shape the purchase agreement, determine the closing conditions, and ultimately decide whether the deal proceeds at all. Getting the timeline and sequencing right is the difference between a smooth closing and a deal that stalls.

Phase 1: The First 48 Hours After LOI Execution

The clock starts the moment the LOI is signed. The first 48 hours set the tempo for everything that follows.

Issue the document request list immediately. Most experienced deal teams maintain template request lists organized by document category: corporate records, material contracts, intellectual property, employment, real property, environmental, litigation, tax, and insurance. Tailor the template to the target's industry and the deal structure, then deliver it to seller's counsel before the end of day one.

Establish the data room. Coordinate with seller's counsel on the virtual data room platform, folder structure, and access permissions. The faster documents start flowing, the sooner your team can begin substantive review. A well-organized data room with consistent naming conventions saves hours of sorting later. For more on this, see our guide on data room organization.

Assign workstreams. Map each diligence category to a responsible attorney or advisor. Legal diligence typically splits into corporate, contracts, employment, IP, real property, and regulatory. Financial, tax, and operational diligence run in parallel with their respective advisors.

Phase 2: Weeks 1 Through 3 - The Initial Review Sprint

This is where the bulk of document review happens. Your team is working through hundreds or thousands of documents across every diligence category simultaneously.

Material Contract Review

Material contracts are the heart of legal diligence. They determine what obligations transfer, what consents are required, and where the risk profile sits. Focus on:

• Change-of-control provisions that could trigger termination rights or acceleration clauses
• Assignment and consent requirements that need third-party action before closing
• Non-compete and exclusivity provisions that could constrain the combined entity
• Indemnification and limitation of liability terms that affect risk allocation
• Renewal and termination mechanics that impact go-forward value

Reviewing material contracts manually across a large data room can consume weeks of associate time. AI-powered contract review tools can extract these provisions across all contracts simultaneously, giving the deal team a structured view of risk within days rather than weeks.

Regulatory and Compliance Review

Regulatory issues create the longest timelines because they depend on government agencies, not the parties. Identify these early:

• HSR Act filing requirements based on transaction size and party revenues
• Industry-specific approvals (banking regulators, insurance commissioners, FCC, state attorneys general)
• Foreign investment reviews (CFIUS for national security, foreign equivalents for cross-border deals)
• Environmental permits and compliance that may require transfer or reissuance

Corporate and Organizational Review

Confirm the target's corporate structure, capitalization, and authority to consummate the transaction. Review charter documents, board minutes, stockholder agreements, and organizational charts. Identify any structural issues that need to be addressed before closing.

Phase 3: Weeks 3 Through 5 - Issue Identification and Negotiation

By week three, your team should have a comprehensive picture of the target's legal landscape. The focus shifts from review to analysis and negotiation.

Build the issues list. Consolidate findings from all workstreams into a single issues list that categorizes items by severity, assigns responsibility, and tracks resolution status. This becomes the central document driving purchase agreement negotiations.

Draft the purchase agreement. The diligence findings directly inform the representations and warranties, indemnification provisions, closing conditions, and disclosure schedules. Issues identified in contract review shape specific indemnity carve-outs. Regulatory findings determine closing conditions and required approvals.

Negotiate based on substance. The deal team with the clearest picture of the target's risk profile has the strongest negotiating position. Structured extraction and analysis gives your team the data to support every negotiating point with specific contract references.

Phase 4: Weeks 5 Through 8 - Pre-Closing Execution

The final phase is execution. The purchase agreement is in final form, and the focus is on satisfying closing conditions.

Third-party consents. Track every required consent, the party responsible for obtaining it, and its status. Material contract consents often require direct outreach to counterparties, and some will require negotiation of consent terms.

Regulatory approvals. Monitor the status of all regulatory filings. Respond promptly to any requests for additional information. Coordinate with regulatory counsel on timing and strategy.

Closing deliverables. Prepare the closing checklist, organize signature pages, coordinate wire instructions, and confirm that all conditions precedent have been satisfied or waived.

Disclosure schedules. Compile the disclosure schedules based on your diligence findings. These are the concrete output of the entire diligence process, translating months of review into the representations that survive closing.

Common Timeline Killers

Deals stall for predictable reasons. Knowing them helps you prevent them.

Late discovery of consent requirements. A change-of-control provision in a material customer contract discovered in week six instead of week one can delay closing by weeks while the parties negotiate with the counterparty. This is the single strongest argument for comprehensive contract review early in the process.

Regulatory surprises. A deal that requires an unanticipated regulatory approval can add months to the timeline. Industry-specific regulatory analysis should happen in the first week, not the third.

Incomplete data rooms. Sellers that populate the data room slowly create cascading delays across every workstream. Establish clear expectations for document delivery timing in the LOI itself.

Scope creep in negotiations. Diligence findings should narrow the negotiation, not expand it. A well-organized issues list with clear severity ratings helps the deal team focus on what matters.

Building a Repeatable Process

The best deal teams treat diligence as a process, not an ad hoc exercise. They maintain template request lists, standardized workstream assignments, and consistent reporting formats. They use technology to accelerate the document review phase so attorneys can focus on judgment calls rather than document sorting.

The shift from manual review to AI-assisted diligence does not replace attorney judgment. It compresses the time between "documents received" and "issues identified," giving deal teams more time for the substantive analysis and negotiation that actually drives deal outcomes.

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