What Happens After the LOI: A Realistic Guide to Due Diligence in SaaS M&A

For SaaS founders, receiving a signed Letter of Intent (LOI) from a buyer can feel like the finish line. In reality, it’s the starting line for the most critical—and sometimes most grueling—phase of the deal: due diligence.

This is where buyers validate every assumption, number, and representation you’ve made. The process can make or break the deal, especially in SaaS transactions where recurring revenue, churn, and customer contracts are under the microscope.

If you’re preparing to sell your SaaS business, here’s what you can expect after the LOI and how to navigate due diligence without unnecessary delays or deal-killing surprises.

Understanding the Purpose of Due Diligence

The goal of due diligence is simple: the buyer wants to confirm they’re getting exactly what they think they’re buying.

For a SaaS company, this means a deep dive into:

Financial performance – Revenue recognition, recurring vs. non-recurring income, and historical accuracy of financial statements.
Customer metrics – Churn rates, customer acquisition costs (CAC), lifetime value (LTV), and contract terms.
Technology stack – Code quality, scalability, security protocols, and intellectual property ownership.
Operational stability – Team structure, key employee retention, and vendor dependencies.
Legal compliance – Licenses, data privacy compliance (GDPR, CCPA), and any pending disputes.

Due diligence is not about mistrust—it’s about risk management. The smoother you make this process, the stronger your position if the buyer tries to renegotiate terms.

The Timeline: How Long Does It Ta

While LOIs often state a due diligence period of 30–60 days, in SaaS deals it can stretch longer. Complex integrations, third-party audits, or extended buyer committee approvals can add weeks or months.

A realistic expectation:

Initial Requests – 1–2 weeks post-LOI.
Document Review – 3–5 weeks.
Follow-up Questions – 2–4 weeks.
Final Approvals & Legal Drafting – 1–3 weeks.

The best way to keep momentum is to respond quickly, provide complete answers the first time, and proactively update the buyer if something changes.

Common Buyer Requests in SaaS Due Diligence

Expect the buyer to request a data room—a secure online folder containing all relevant documents. Typical categories include:

Financials – At least 3 years of P&L statements, balance sheets, and tax returns.
Customer Data – Contract copies, renewal schedules, churn reports, and pipeline metrics.
Technology Documentation – Architecture diagrams, third-party integrations, and source code escrow details.
HR & Operations – Employee agreements, benefit plans, and organizational charts.
Legal Documents – IP ownership records, software licenses, and compliance certifications.

Having these organized before the LOI is signed can save weeks of back-and-forth.

Red Flags That Can Derail a Deal

Even if your SaaS company is healthy, certain issues can make buyers hesitate:

Unclear revenue recognition – Mixing setup fees or one-time projects into recurring revenue without proper classification.
High churn without explanation – If churn spiked in the past year, be ready to explain it with data, not guesses.
Unresolved compliance gaps – Especially in data privacy and security protocols.
Overreliance on a single customer or employee – Revenue concentration and key-person risk can trigger valuation adjustments.

Identifying and addressing these before the LOI can make due diligence far less painful.

How to Protect Yourself as the Seller

Buyers aren’t the only ones with something at stake. Sellers should use due diligence to confirm the buyer’s seriousness and ability to close. Ask for:

Proof of funds or financing commitments.
Clear decision-making timelines.
Transparency on purchase agreement terms—especially reps, warranties, and indemnifications—before spending months on due diligence.

A reputable buyer will provide these without hesitation.

The Bottom Line

The period after signing an LOI is a test of preparation, transparency, and patience. If you treat due diligence as a collaborative process—not an interrogation—you’ll not only protect your valuation but also build trust that carries into post-sale transition.

For SaaS founders, understanding the realities of due diligence in SaaS M&A is the difference between a deal that closes on time and one that falls apart at the eleventh hour.