If you have seen a purchase price listed in a Letter of Intent (LOI), the number feels real. It’s concrete. Tangible. A reward for decades of hard work.
But here’s the truth that catches far too many sellers off guard: that number isn’t the one you’ll take home.
The number that actually matters is your after-tax proceeds. And it’s almost always lower than you expect.
Exercise Caution When Signing
We’ve seen it again and again: a seller receives an LOI, locks in a headline price, and gets emotionally attached to that number—without ever understanding how much tax they’ll owe or how the deal structure affects their final payout.
By the time they ask the question, it’s often too late. The buyer has negotiated based on a certain valuation framework. The seller has signed exclusivity. And any attempts to restructure the deal can feel like re-trading or stalling.
An experienced M&A advisor can protect and maintain the fairway on deal value even after a signed LOI, but it will never be with the same latitude as prior to the signing of an LOI.
Know Your Deal Before You Lock It In
That’s why after-tax proceeds should be part of the conversation before you ever sign an LOI.
A seasoned M&A advisor can walk you through basic deal structures (stock vs. asset sale, earnout design, rollover equity, allocation of purchase price) and show you how each one impacts your net proceeds—not just your gross price. The right deal structure needs to be set before you sign the LOI, as this can have big implications for the deal.
From there, you can negotiate the right terms into the LOI while you still have leverage and options.
Bring in the Tax Advisor Early—Not at the End
Before you sign an LOI, a specialized M&A tax advisor should run projections, analyze your basis, model out alternative structures, and flag any red-flag issues—like personal goodwill treatment, state nexus tax surprises, or QSBS eligibility (if applicable). An M&A advisor would be able to help you determine the exact right spot to bring them in.
A good tax advisor doesn’t just prepare returns—they shape outcomes. They form a critical part of the ‘three-legged stool'.
Don’t Fall for the "Top-Line Trap"
We’ve heard from prospective sellers who reach out to us after they’ve received a $15 million offer for their firm. But once we walk them through the deal structure and educate them on estimated taxes, they realized their take-home might be closer to $8 million.
Had they accepted the deal at face value, without adjustments to structure or payout timing, they would’ve left millions on the table.
With the help of our advisory team, they are able to get the deal to a better starting point.
In contrast, the best-informed sellers start with one question:
“How much am I actually going to keep?”
Your Takeaway
Before you fall in love with a deal’s top-line price, build a plan to optimize what really matters—your bottom-line, after-tax outcome. That starts in the early deal discussions with your M&A advisor and continues with expert tax guidance at the LOI stage.
At PSMJ, we don’t just help you get a deal done—we help you make sure the deal works for you.
Have you had to weigh multiple offers? Have you thought about pursuing a transaction? Let us know with a comment below. All comments are reviewed by PSMJ's Growth and Transition Advisory and are not shared publicly unless you request them to be.
*This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, or financial advice.