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Signing a Letter of Intent can feel like the hardest part of selling a business. In reality, it is the point where the transaction moves into a much more consequential phase: exclusivity, diligence, financing, documentation and closing.

Q3 2026 is not a market where every Northern California business is receiving the same valuation. The broader lower middle market is active, but buyers are increasingly selective about the quality of the companies they pursue.

Every HVAC owner who has spent years building routes, training technicians, winning service contracts, and answering emergency calls eventually asks the same question: what is this business actually worth?

MSP owners tend to enter a sale conversation with a stronger understanding of recurring revenue and operating metrics than many other business owners.

In earnout M&A, the structures most likely to pay the seller are based on revenue milestones, last 12 to 24 months, include precise accounting definitions, and allow the seller to retain meaningful operational control after closing.

A net working capital peg is the agreed target level of normalized operating working capital that a business is expected to deliver at closing. It is typically based on the trailing 12-month average of normalized working capital, adjusted for seasonality, growth trends, and one-time items. The closing working capital is then compared against this target, and any shortfall or excess results in a purchase price adjustment through the closing statement or post-closing true-up.

A single EBITDA adjustment can look harmless until an independent Quality of Earnings review challenges it. What surprises many business owners is that buyers rarely remove the aggressive adjustments first. They remove the ones sellers believed were already settled.

Business owners often assume that if their company’s revenue and EBITDA remain strong, its value should remain unchanged. In reality, interest rates can significantly influence business valuation multiples, even when the business itself is performing just as well as it did a year ago.

Receiving a Letter of Intent (LOI) is an exciting milestone for any business owner. It signals that a buyer has expressed serious interest in acquiring your company and is willing to move forward with the transaction. However, many owners mistakenly believe that once the LOI is signed, the hardest part of the sale is over.