Before submitting a Letter of Intent (LOI), buyers need confidence that the EBITDA assumptions supporting their valuation are realistic. Bid too aggressively, and the deal may not deliver the returns lenders and investors expect. Bid too conservatively, and you risk losing the opportunity altogether. That’s why many investors are bringing diligence professionals into the process before an LOI is signed.
CFOx recently worked with a private equity firm evaluating the acquisition of San Francisco-based fractional finance and back-office services provider. Before submitting a bid, our client wanted an independent assessment of the company’s earnings profile and a clearer understanding of what EBITDA could realistically look like under a diligence lens. CFOx was engaged during the pre-LOI phase to help answer those questions and provide actionable insights before a valuation was finalized.
Rather than waiting until exclusivity, our transaction advisory team conducted a focused pre-LOI analysis designed to evaluate the quality and sustainability of earnings. The goal was to determine whether the EBITDA assumptions being used in the buyer’s model were attainable and whether the resulting bid would remain attractive to both lenders and future investors.
One of the most important questions buyers face before submitting an LOI is not “What is EBITDA today?” but rather “What should we realistically underwrite as EBITDA?” A diligence professional can help identify adjustments, normalize earnings, and assess whether the business can support the assumptions embedded in a proposed valuation. Those insights often become the difference between a disciplined bid and an offer that is difficult to justify later in the process.
By bringing CFOx into the process before an LOI was submitted, the client gained greater confidence in its underwriting assumptions and a clearer view of the business’s financial profile. The analysis helped inform valuation discussions, refine EBITDA expectations, and reduce the risk of submitting an offer based on unsupported assumptions.
For private equity firms competing in today’s market, pre-LOI diligence can be a powerful tool. It enables buyers to move faster, bid with greater conviction, and avoid surprises that could derail financing discussions or investment committee approval later in the process.
When buyers understand what is achievable before they submit an offer, they are better positioned to pursue opportunities confidently, structure competitive bids, and create value from day one. CFOx helps buyers gain that clarity early, allowing them to make informed decisions before the LOI is ever signed.
If you would like to learn more about our Transaction Services, please reach out via email (info@cfoxadvisory.com) or schedule a call directly on our Contact Us page.
Services Provided:
- Pre-LOI Diligence
