Scenario 01

---
name: identify-pre-loi-issues-scenario-01
task_id: corporate-ma/identify-pre-loi-issues/scenario-01
description: Guides preparation of a pre-LOI issues memo identifying material risks, information gaps, and inconsistencies that should be resolved or addressed before signing a letter of intent in an acquisition setting.
activates_for: [planner, solver, checker]
---

# Skill: Pre-LOI Issue Identification Memorandum

## 1. Subject-matter triage
- Use this skill when the task is to review preliminary deal materials and flag what must be clarified before LOI signing.
- Treat the work as issue-spotting from incomplete sell-side materials, not full diligence or definitive legal advice.
- Separate true pre-LOI blockers from matters that can wait for confirmatory diligence or be managed in the definitive agreement.
- If the materials cover multiple entities, periods, facilities, or transaction paths, enumerate each scope item first and analyze them separately rather than collapsing them into one pass.

## 2. Failure modes the skill is correcting
- Issues are identified from preliminary materials without systematically identifying what is missing and therefore unknowable at LOI stage.
- Financial summary figures are accepted at face value without checking for internal inconsistencies across decks, teasers, data room indexes, and process materials.
- Regulatory and operational risks are described in generic terms instead of being tied to the business model and the specific pre-LOI clarification needed.
- The memo blurs issues that should be solved before signing from issues that can be allocated by representations, covenants, indemnities, or closing conditions.
- The output lists concerns without ranking them by seriousness, causing loss of triage value.
- The output diagnoses problems without giving an actionable next step tied to the transaction timeline.

## 3. Legal frameworks / domain conventions that apply
- Pre-LOI diligence is bounded by the materials actually available at the early bid stage; the task is to identify material risks, gaps, and inconsistencies that affect whether, how, and on what terms the buyer should proceed.
- The LOI is typically where the buyer locks in economics, structure, diligence access, exclusivity, and any pre-signing conditions that are necessary to avoid a mispriced or unworkable bid.
- For an environmental services business, focus on permitting, environmental compliance history, remediation or response obligations, site-specific liabilities, contract concentration, customer churn, subcontractor reliance, and any operational dependency that can change value or execution risk.
- Preliminary financial summaries must be checked against supporting schedules and source materials for internal consistency; unexplained movement between summaries is itself a diligence flag.
- A missing document category in the preliminary data room index is an information gap, not a neutral absence; the lack of production should be called out as a requested clarification.
- When legal propositions are stated, identify the controlling authority or governing instrument if it appears in the materials; otherwise cite the relevant statutory, regulatory, or customary corporate/M&A convention by name rather than speaking in conclusory generalities.
- Apply established environmental-law and transaction-diligence conventions where relevant, including permit compliance, disclosure obligations, and liability allocation principles under the applicable regulatory regime.

## 4. Analytical scaffolds
- Start with the business model: what the target does, how it earns revenue, where operations occur, and what facts in the materials suggest concentration or dependency.
- Cross-check the management presentation, CIM, teasers, and index for mismatched figures, dates, naming conventions, customer descriptions, margin data, or risk descriptions.
- Review the document index category by category and note whether core diligence buckets are present or missing: corporate, financial, tax, employment, real estate, environmental, litigation, insurance, IT/cyber, and commercial.
- Review process constraints: bid deadline, access limits, no-shop or exclusivity dynamics, Q&A timing, and any other restrictions that affect what can realistically be resolved before LOI.
- For each issue, determine whether it is:
  - a fundamental business or valuation issue,
  - a deal-protection issue suitable for the LOI, or
  - a missing-information issue that requires follow-up before signing.
- For each issue, record the source material that triggered it, the reason it matters now, and the practical consequence if it is not resolved.
- When multiple facilities, permits, customer types, or risk periods appear in the materials, analyze each separately and do not assume one site or contract represents the rest.
- Give every item an ordinal severity level from a fixed scale stated once in the memo, and keep the same scale throughout.

## 5. Vertical / structural / temporal relationships
- Distinguish pre-LOI unknowns from post-LOI diligence items:
  - pre-LOI unknowns affect bid price, structure, go/no-go, or conditions to sign;
  - post-LOI items can be handled through confirmatory diligence and definitive documentation.
- Track how an issue moves vertically through the deal stack: business fact → valuation effect → legal risk → LOI term or closing condition.
- Tie each issue to the stage at which it becomes actionable: before LOI, at LOI, during exclusivity, or in definitive documents.
- Where a risk depends on time, identify whether it is historic, current, or forward-looking, and whether the available materials cover the relevant period.
- If the issue turns on a threshold, exposure, concentration, or duration, compare the disclosed information to that benchmark using the figures in the source set; if the source set does not provide the necessary numbers, say so expressly.

## 6. Output structure conventions
- Produce a single issues memorandum, not a diligence report and not a transaction memo.
- Use a conventional issue-memo shape:
  - brief executive overview,
  - prioritized issue list with severity labels,
  - financial and valuation concerns,
  - legal/regulatory concerns,
  - operational and commercial concerns,
  - missing information / diligence gaps,
  - recommended LOI or pre-LOI follow-up actions.
- For each issue entry, include:
  - severity,
  - concise statement of the issue,
  - source or trigger in the preliminary materials,
  - why it matters before signing,
  - the likely consequence if unresolved,
  - the immediate action needed.
- When the materials support a legal proposition, name the rule, statute, regulation, or customary M&A convention supporting it; do not leave legal conclusions ungrounded.
- Use exact, operative language. Do not merely summarize the materials; state the risk, the gap, and the decision implication.
- End with a Recommended Actions block that assigns each next step to a role likely to own it in the deal process and ties it to the bid, LOI, or diligence timeline.
- Keep the memo focused on pre-LOI triage; do not drift into drafting definitive-agreement language unless the point is to identify what the LOI should reserve, condition, or exclude.