A panel of M&A industry experts turned the spotlight on pre-Letter of Intent (LOI) due diligence during a discussion at the recent AM&AA Winter Conference in Scottsdale, Arizona.
The AM&AA Winter Conference, held late January in Scottsdale, Arizona, featured an array of educational content and networking opportunities, providing sponsors, attendees, and speakers with valuable face-to-face time to discuss the industry’s hottest topics.
With the top minds in the mergers and acquisitions space under one roof, the event featured a number of educational sessions presented by experts in the industry imparting their knowledge and expertise with those in attendance.
The first General Session of the event focused on the future of the M&A space, as EisnerAmper presented the “Market Update: New Year, Brighter Future for M&A” session, featuring industry experts in the middle market M&A and private equity space sharing current market characteristics, including data on completed transactions. The discussion included a current market assessment on valuation, deal structuring, and leverage.
Session Two of the event, “Navigating the World of Continuation Vehicles,” featured a panel sharing their thoughts on the expanding continuation vehicle (CV) market. During this session, panelists explored the pros and cons of CVs for general partners, limited partners, and secondary investors.
Day two of the event featured the third General Session, “Foundations of Success: Pre-LOI Due Diligence Essentials,” highlighted by a panel discussion on pre-Letter of Intent (LOI) due diligence in mergers and acquisitions. Panelists explored the strategies, challenges, and best practices for conducting thorough due diligence before formal commitments are made in a transaction.
Panelists for this session included Lindsey Wendler, Managing Director with 414 Capital, who served as moderator of the discussion; Joe Basilico, Principal with Doeren Mayhew; Craig Bunker, Director of Business Development, Tonka Bay Equity Partners; Jeff Michelson, Partner, Transaction Advisory with CohnReznick; and Robert Schroeder, Partner with BakerHostetler.
The panel opened with a discussion on the components of successful pre-LOI due diligence in a transaction.
“Get your accounting team involved in the pre-LOI process,” explained Basilico. “It doesn’t take us much time to look at a set of financials and be able to identify some red flags, some things to consider. If the financial statements are messy, things are out of whack, we could tell pretty quick if things aren’t GAAP [generally accepted accounting principle]-compliant, and maybe some issues to consider. I would say, get your advisors involved early. Let them take a look. They should be able to do it at a low cost, or free. It would really give you some good insight.”
Schroeder shared his view from the legal side.
“From the legal perspective, a lot of times the attorneys are not involved until negotiating the LOI,” noted Schroeder. “It’s useful if we can get involved a little before then, so that we can help analyze the structure, in terms of taking the information that you have from the financial or the tax diligence that happens at an early stage, to make sure the proposed structure makes sense.”
Michelson introduced the importance of cyber security issues in the transactions of today.
“Cyber security issues are everywhere right now,” said Michelson. “So, I think making sure that you are reviewing IT systems, or cyber environment, as we have seen, in our group, probably a dozen deals over the past couple of years having completely died because of cyber issues. These issues were not disclosed up front. So, just from diligence work that was done. And it’s a shame because that’s something that should be noted up front.”
Wendler described a situation where proper due diligence came into play and saved a deal.
The topic turned to deal preparation, and when a business should begin a review of their financials to ensure that they are as investor-friendly as possible?
“Getting to know a client and spending time with management teams is critical for assessing culture and alignment,” said Bunker.
And as legal and regulatory trends continue to evolve, the panelists stressed the importance of keeping ahead of this curve, as advanced preparation now will avoid future dilemmas down the line.
“Changes in regulations, such as increased focus on E-Verify compliance, are influencing diligence priorities. Sellers should prepare for stricter scrutiny of employee documentation and regulatory compliance,” noted Shroeder.
Click here to view a recap of the “Foundations of Success: Pre-LOI Due Diligence Essentials” panel discussion at the 2025 AM&AA Winter Conference.
