The question I ask founders before we run a process: which buyer are you prepared for?
Most of the time, the answer is "whoever pays the most."
That is the wrong answer.
We tracked 89 lower-middle-market transactions in Q4 2025 and Q1 2026 (https://dx.doi.org/10.2139/ssrn.6515478). Post-LOI price adjustments happened in 68 percent of deals. The median compression was 9.8 percent. The range ran from zero compression to 31 percent downward adjustment.
The pattern was not random. Compression clustered around preparation gaps. Founders who chased the highest LOI without building lane-specific preparation paid the highest price during diligence.
Here is what that looks like in practice.
A founder came to us after signing an LOI with a strategic buyer at $14.5M. The buyer modeled retention assumptions for the top five customers, who represented 61 percent of revenue. During diligence, three of those customers indicated they were "evaluating alternatives" or "not certain about continuity post-transaction."
The retention risk repriced the deal. The strategic buyer reduced the purchase price to $11.8M and shifted $1.2M into an earnout tied to twelve-month retention. The founder closed at $11.8M upfront and never hit the earnout. Effective sale price: $11.8M, down 18.6 percent from the LOI.
The problem was not the buyer. The problem was preparation. The founder optimized for getting the highest letter. He did not optimize for closing at the price on the letter.
If we had worked with him six months earlier, the preparation would have looked different. We would have documented customer relationships, stress-tested retention assumptions with direct customer conversations, and built a retention plan the buyer could underwrite. That work would have either validated the $14.5M price or surfaced the retention risk early enough to pivot to a different buyer lane.
Strategic buyers pay for synergies and retention. PE buyers pay for EBITDA and scalability. Family office buyers pay for continuity and simplicity. Each lane has a different breaking point. Each lane requires different preparation.
Most founders do not pick a lane. They run a generic process, take the highest LOI, and hope diligence does not surface anything that reprices the deal. In 68 percent of cases, it does.
The founders who close at or near the LOI price are the ones who answer the buyer lane question early. They pick a lane based on how their business is structured, they build the preparation that lane requires, and they run a process designed to attract buyers who underwrite the way their business is prepared.
That is not guessing. That is preparation.
The data is clear: post-LOI compression is predictable. The gaps that cause compression are visible six to twelve months before the process starts. The founders who close strong are the ones who see those gaps early and fix them before the buyer does.
Which buyer are you prepared for? If the answer is "whoever pays the most," you are not prepared yet.