--- title: "Questions to Ask a Private Equity Firm Before an LOI" description: "Before you sign a letter of intent, ask a private equity firm about structure, your role, debt, your team and its record. Use this checklist of questions." url: https://capstreet.multisites.ai/insights/questions-to-ask-a-private-equity-firm-before-an-loi publisher: Capstreet phone: +1-713-332-2700 contact: https://capstreet.multisites.ai/contact --- # Questions to Ask a Private Equity Firm Before an LOI Before you sign a letter of intent, ask the private equity firm how much of the price is cash versus rolled equity, what role you will have, how much debt it plans to use, what happens to your team and what past owners say. Get answers in writing. Selling your businessPublished November 10, 20264 min read ![Capstreet team members at Houston Reads Day](https://capstreet.multisites.ai/_astro/houston-reads-day.DxNd9bIr_Z23gxjt.webp) ## Why ask questions before you sign a letter of intent? The letter of intent is where price, structure and timing first become concrete. Many LOIs also include an exclusive period, so ask your lawyer how much room you keep to talk to other buyers once you sign. Ask your hard questions first. First Citizens, a bank with a wealth practice, says to evaluate a buyer “just as rigorously as they evaluate you.” The buyer will review your books, contracts and customers. You should review the buyer with the same care. Our [letter of intent guide](https://capstreet.multisites.ai/guides/letter-of-intent) covers the document itself. ## What should the structure of the offer look like? Ask how much of the price is cash at closing, how much is rolled equity and how much depends on future results. The headline price means little until you see those three parts. Altair Advisers, a wealth advisory firm, says private equity deals “usually include a third component: earnout payments” on top of cash and rollover equity. Ask for each piece in dollars. Then ask how each piece is paid and what could reduce it. Our posts on [rollover equity](https://capstreet.multisites.ai/insights/what-is-rollover-equity) and [how long an earnout lasts](https://capstreet.multisites.ai/insights/how-long-does-an-earnout-last) explain the terms. ## Which five questions matter most? Five questions cover most of the risk: fit, structure, your role, debt and the firm’s record. The table below shows what to ask on each topic and what a clear, useful answer sounds like. Topic What to ask A clear answer sounds like Fit Why are you interested in my company, and why this industry? A specific reason tied to your market, not a general pitch Structure How much is cash, rolled equity and contingent pay? Dollar amounts and dates for each part Your role What is my job on Day 1 and in year three? A written role, reporting line and board seat plan Debt How much debt will you place on the business? A number, a lender plan and a downside case Record Which owners can I call, including ones who left? Names, with no screening First Citizens advises you to “start by asking about their strategic fit and why they’re interested in your company.” It also says to ask “how much debt they plan to place on your business to fund the transaction.” ## What should you ask about your role and your team? Ask what you will do after closing, who you will report to and what happens to your key people. Get clear answers now, because vague promises before the LOI often become hard conversations after closing. First Citizens tells owners to “insist on clarity regarding your role after the sale” and to ask how the new owners plan to incentivize your existing team. It also suggests you ask about workforce reductions. Altair Advisers adds a hard fact: a firm may bring in new executives, and “One of them may replace you before you are ready.” Ask what would trigger a change in leadership and how it would be handled. Our post on [why private equity wants a team that runs without you](https://capstreet.multisites.ai/insights/why-private-equity-wants-a-team-that-runs-without-you) explains why this matters to buyers. ## How do you check a firm’s track record? Ask for references from owners the firm has bought from, including owners who left, and look at what happened to those companies. A firm that has treated owners well will not hesitate. First Citizens says to “ask for references from founders of companies they’ve acquired, and look closely at the outcomes of past investments.” Also ask which fund the firm is investing from and how long it expects to hold your company. Compare answers from more than one buyer. Our guide on [how to choose a private equity partner](https://capstreet.multisites.ai/guides/how-to-choose-a-private-equity-partner) gives a longer checklist. ## Who should be on your team before you sign? Build your team before the LOI. You need a lawyer, an accountant and a financial professional who handle sales of private companies. Add an estate attorney and a wealth adviser for your personal planning. Altair Advisers says “your business team should consist of an attorney, accountant and financial professionals specializing in mergers and acquisitions.” It adds that many planning steps need to happen before, and sometimes years before, a sale. If you want a banker or advisor, see our guide on [working with an investment banker or advisor](https://capstreet.multisites.ai/guides/working-with-an-investment-banker-or-advisor). ## What happens between the LOI and closing? After the LOI, the buyer runs due diligence, which means a close review of your finances, contracts and operations. First Citizens says the process “is often rigorous and can consume a considerable amount of time from you and your executive team.” Expect heavy negotiation on valuation, earnout structure and the specific terms of the sale. Plan for the cost too. First Citizens warns that accounting, legal and advisory fees “can accumulate quickly.” A clean set of books speeds this stage. Our post on [how to get ready for a quality of earnings report](https://capstreet.multisites.ai/insights/how-to-get-ready-for-a-quality-of-earnings-report) shows what buyers check, and the [due diligence checklist for owners](https://capstreet.multisites.ai/guides/due-diligence-checklist-for-owners) lists the documents to gather. If the LOI is right, closing should hold few surprises. If it is vague, surprises tend to appear here. ## Which terms should you learn before the first call? A few terms come up in every conversation with a buyer, and you should know each one before the first call. The [glossary](https://capstreet.multisites.ai/glossary) defines them in plain words: - [Letter of intent](https://capstreet.multisites.ai/glossary/letter-of-intent) and [exclusivity period](https://capstreet.multisites.ai/glossary/exclusivity-period) - [Earnout](https://capstreet.multisites.ai/glossary/earnout) and [rollover equity](https://capstreet.multisites.ai/glossary/rollover-equity) - [Quality of earnings](https://capstreet.multisites.ai/glossary/quality-of-earnings) and [due diligence](https://capstreet.multisites.ai/glossary/due-diligence) Reading them first lets you spend your time on judgment, not vocabulary. If you want a view of the full process, see how to [sell your business to private equity](https://capstreet.multisites.ai/sell-your-business-to-private-equity). ## Next step You are welcome to ask us any of these questions. Start with [our deal criteria](https://capstreet.multisites.ai/deal-criteria), then call 713-332-2700 or email [connect@capstreet.com](mailto:connect@capstreet.com) for a confidential conversation through [/contact](https://capstreet.multisites.ai/contact). ## Frequently asked questions ### What is a letter of intent in a business sale? A letter of intent, or LOI, is a written offer that sets the main terms of a deal before the final contract. It usually covers price, structure, timing and exclusivity. Ask your lawyer which parts bind you before you sign, because they differ from deal to deal. ### Should I talk to other owners the firm has bought from? Yes. First Citizens advises owners to ask for references from founders of companies a firm has acquired and to look closely at the outcomes of past investments. A firm that backs its record will give you names. Speak to owners who stayed and owners who left. ### Do I need an advisor before signing an LOI? Yes. Altair Advisers says a private equity sale is not a do-it-yourself project and tells owners to build a team of an attorney, an accountant and financial professionals who specialize in mergers and acquisitions. Bring them in before you sign, not after. ### Can I ask a firm how much debt it plans to use? Yes, and you should. First Citizens says many private equity deals are financed with debt placed on the company's balance sheet, which raises risk. Ask how much debt the firm plans to place on your business and how it would affect your company in a slow year. ## Terms on this page - [Quality of Earnings](https://capstreet.multisites.ai/glossary/quality-of-earnings) - [Exclusivity Period](https://capstreet.multisites.ai/glossary/exclusivity-period) - [Letter of Intent](https://capstreet.multisites.ai/glossary/letter-of-intent) - [Rollover Equity](https://capstreet.multisites.ai/glossary/rollover-equity) - [Private Equity](https://capstreet.multisites.ai/glossary/private-equity) - [Due Diligence](https://capstreet.multisites.ai/glossary/due-diligence) - [Earnout](https://capstreet.multisites.ai/glossary/earnout) ## Sources 1. [First Citizens Wealth: What to know before selling your business to private equity](https://www.firstcitizens.com/wealth/insights/business-planning/selling-your-business-to-pe-firms) 2. [First Citizens Wealth: What to know before selling your business to private equity](https://www.firstcitizens.com/wealth/insights/business-planning/selling-your-business-to-pe-firms) 3. [First Citizens Wealth: What to know before selling your business to private equity](https://www.firstcitizens.com/wealth/insights/business-planning/selling-your-business-to-pe-firms) 4. [First Citizens Wealth: What to know before selling your business to private equity](https://www.firstcitizens.com/wealth/insights/business-planning/selling-your-business-to-pe-firms) 5. [Altair Advisers: 5 Things to Know About Selling Your Business to Private Equity](https://altairadvisers.com/5-things-to-know-about-selling-your-business-to-private-equity/) 6. [Altair Advisers: 5 Things to Know About Selling Your Business to Private Equity](https://altairadvisers.com/5-things-to-know-about-selling-your-business-to-private-equity/) Written by Capstreet and checked against the sources above on November 10, 2026. Market figures and deal practice change, and nothing here is legal, tax or investment advice. Ask your own advisers before you act. ## Keep reading - [The due diligence checklist for owners selling to private equityDue diligence is the buyer's check of your business after you sign a letter of intent. Private equity firms review five areas: financial (quality of earnings), operations, tax, HR and benefits, and legal. Owners who gather clean records before the process starts shorten it and face fewer surprises.](https://capstreet.multisites.ai/guides/due-diligence-checklist-for-owners) - [How to choose a private equity partner for your businessChoose a private equity partner on fit, not only price. Compare how much you get in cash, what role you keep, how the firm treats your team, how it uses debt, and what past founders say. Ask for references from founders who sold to the firm, and ask your lawyer to review the terms.](https://capstreet.multisites.ai/guides/how-to-choose-a-private-equity-partner) - [How to sell your business to private equitySelling to private equity means a firm buys most of your company, usually with a mix of cash at close and equity you keep. You work through an intro call, a data request, a letter of intent, diligence and a close. Most owners stay on and invest alongside the buyer.](https://capstreet.multisites.ai/sell-your-business-to-private-equity) - [The letter of intent: what it says, what binds you and what to negotiateA letter of intent (LOI) is a short document where a buyer states the price and main terms it proposes. Most terms are non-binding. A few, usually exclusivity and confidentiality, do bind you. Signing starts diligence and takes your company off the market, so negotiate it with a lawyer.](https://capstreet.multisites.ai/guides/letter-of-intent) - [Working with an investment banker or advisor when you sellMost owners should work with a deal team when selling to private equity. That team includes a lawyer, an accountant, a tax or wealth adviser and often an investment banker or sell-side advisor who runs the process. You can sell without a banker, but you carry the risk of mistakes.](https://capstreet.multisites.ai/guides/working-with-an-investment-banker-or-advisor) - [Why Private Equity Wants a Team That Runs Without YouPrivate equity firms buy a company and then grow it with the people already there. If the founder makes every decision, the buyer takes on a risk it cannot fix. A management team that runs the business without you proves the company can grow and keeps its value after you step back.](https://capstreet.multisites.ai/insights/why-private-equity-wants-a-team-that-runs-without-you) ## Ready to get started? Let’s talk. Tell us about your company and what you want next. Conversations are private, and there is no obligation. [Start a conversation](https://capstreet.multisites.ai/contact) [(713) 332-2700](tel:+1-713-332-2700)[connect@capstreet.com](mailto:connect@capstreet.com) ![Capstreet team members at a Houston elementary school for Houston Reads Day](https://capstreet.multisites.ai/_astro/houston-reads-day.DxNd9bIr_tggWP.webp)