One provision commonly found in Letters of Intent is language stating that a transaction remains subject to “necessary approvals.” Sellers often read past it as boilerplate. It isn’t; a signed LOI doesn’t mean the buyer already has authority to close, and in the middle market of aerospace and defense, understanding what sits behind that clause can affect your timeline, your information requests, and your leverage in the weeks that follow.
So, what do “necessary approvals” typically mean?
Investment Committee Approval
For private equity buyers, one of the most common requirements is investment committee approval. The committee decides whether a proposed acquisition fits the firm’s investment strategy and satisfies its return objectives.
The deal team will present the investment thesis, valuation, financing structure, diligence findings, key risks, and expected returns. The committee may approve the deal as presented, send the team back for further work, or require changes to price or structure before authorizing the buyer to proceed. Sellers should expect this review to shape the pace and substance of diligence requests in the first several weeks of exclusivity, and should not assume a signed LOI means the buyer’s internal case has already been made.
Board or Executive Approval
Strategic acquirers often have their own internal review processes. Depending on the size and significance of the acquisition, approval may be required from senior executives, a corporate development committee, or the board of directors.
These reviews are designed to ensure that the acquisition aligns with the company’s strategic priorities, financial objectives, and long-term growth plans, and the timing of a board or committee calendar can add time to the transaction timeline.
Financing Approval
When acquisition financing is involved, lenders typically have their own approval process to complete before closing can occur. Financing discussions often begin before the LOI is signed, but formal underwriting isn’t completed until afterward — frequently running in parallel with the buyer’s own confirmatory diligence.
This review may include an assessment of financial performance, customer and program concentration, backlog quality, and working capital requirements before financing commitments are finalized.
Why This Matters for Sellers
Sellers who understand what happens behind the scenes after an LOI is signed are often better prepared for the final stages of a transaction. Signing the LOI doesn’t mean the deal is done; it means the approval process is just beginning. A seller may have limited ability to influence how a buyer works through that process internally, but knowing what’s involved can provide valuable context regarding timing, information requests, and closing requirements.
Ultimately, each buyer has its own approval framework, and that context can help sellers navigate the process with greater clarity, confidence, and realistic expectations.
Have a good day,
Troy Medeiros
Vice President
