Cordis GlobalAdvisory · Intelligence · Ventures
Forbes Business Council · June 2026

Why Founders Should Build A Gap Table Before The Letter Of Intent Arrives

Owners tend to read the headline in a letter of intent as the deal. In this Forbes piece I argue that it is closer to the opening of the real negotiation, and I describe a simple five-column table an owner can build in advance to see each price reduction coming and decide how to meet it.

Ron Smith

Read it in Forbes

Summary

The letter of intent is a midpoint.

The core argument: the gap between the number in the letter and the money at closing is where preparation pays off or does not. In one case I describe, a letter that implied about 7.2x EBITDA settled closer to 6.5x by the time the money moved. Nothing went wrong. That is how the process runs when the seller has not mapped it in advance.

The pattern is common enough to measure. In the Working Paper 001 dataset, 73% of lower-middle-market transactions included at least one price adjustment after the letter of intent, averaging 18% of enterprise value.1 An owner who has built the table sees those adjustments coming. An owner who has not meets them one at a time, late, with little room to answer.

The method

Five columns, one row for each item a buyer is likely to reprice.

Build it before the letter of intent conversation. Each row is one issue a buyer's review is likely to raise.

  1. 01Line item.The specific issue the buyer will raise, such as working capital or an adjustment to earnings.
  2. 02Why.The buyer's reasoning, which differs for a private equity fund, a strategic acquirer and a family office.
  3. 03Fix.What the owner can still change before the conversation.
  4. 04Position.What cannot change in time, explained so that it costs less at the table.
  5. 05Concede.What the owner has already decided to give, so it is given on purpose rather than surrendered under pressure.
Every row decided in advance is one less concession made in the room, under a deadline, to a buyer who already has exclusivity.
Ron Smith, CM&AA, Founding Partner

Work the seller can do first.

Treat the letter of intent as a midpoint. Most of the distance between that number and the close comes from items the seller could have found, priced and answered before a buyer did. The table turns those items from surprises into decisions.

The later research builds on this idea. Working Paper 004 adds the next step: once the table shows where value is exposed, rank the fixes by the value each protects for the effort it takes, and leave the rest alone.

Related

Read next.

Working Paper 001: The Preparation GapThe data on how often prices change after the letter of intent, by category.Read moreWorking Paper 004: The Preparation FrontierWhich rows of the table to fix first, for which buyer, and when to stop.Read moreThe Value Protection StudyA written read of what a buyer's accountant would raise, and the document that answers each item.Read more

Sources

  1. Cordis Institute, Working Paper 001, The Preparation Gap in Early 2026, April 3, 2026 Source

Cite this

Smith, R. (2026, June 26). Why Founders Should Build A Gap Table Before The Letter Of Intent Arrives. Forbes Business Council.

See the rows of your table before a buyer writes them.

Cordis works with owners preparing to sell and with owners growing through acquisition.

Start a confidential conversationGet a no-cost Value Protection Study

A written read of how a buyer will see your company.