Can AI Replace Your M&A Lawyer? The Truth About Legal Risk in the Age of AI with Eric Hsu
Buying Online Businesses PodcastShow Notes
Most people think the biggest risk in buying a business is overpaying. It's not. It's signing an LOI you don't fully understand. Moving fast because someone on the internet told you speed wins. Then finding yourself thirty, forty thousand dollars deep into a deal that was never going to close the way you structured it. Eric Hsu has seen it happen more times than he can count. Over 160 closed deals as an M&A attorney who exclusively represents buyers. And the pattern almost always starts at the LOI - that document most first-time buyers treat like a formality. AI can hand you twenty questions to ask a seller. It can flag risk, validate numbers, model theory. It's genuinely useful. And genuinely dangerous when you don't know what you're actually looking at. Because AI can't read why a seller gets vague about their Google Ads account in a way that means something. It can't tell you that annual subscription revenue the seller just collected isn't really theirs yet - and your client inherits every obligation to fulfil it. It doesn't understand deal psychology. It can't sit across from someone who built their business over thirty years and feel where the resistance is coming from. That's pattern recognition. That's what 160 closed deals actually buys you. In this episode, Jaryd and Eric pull apart exactly where AI helps, where it quietly misleads you, and where it has no business making the call. You'll learn: Why the LOI is the single most expensive legal mistake first-time buyers make - and what stress-testing one actually looks like before you sign The working capital trap that kills deals mid-diligence and leaves buyers choosing between injecting $100K cash or walking away with nothing How SBA lending rules have shifted since mid-2025 - and why brokers now favour cash buyers who show up lender-ready from day one What AI genuinely cannot replicate: pattern recognition, human behaviour, and the deal empathy that holds negotiations together The holdco structure Eric recommends for portfolio buyers - when to set it up, why before your first SBA close, and what it actually costs Why integrity issues during diligence are non-negotiable walk-aways - and the dating analogy that explains exactly why The glue of the deal is the relationship. The trust. The ability to get both sides on a call and actually work something out. AI can model the numbers. It can't do that. 🎧 Hit play - the most expensive legal mistake in your deal is the one you didn't know you were making.
Episode Highlights 03:32 - The Single Biggest Legal Mistake First-Time Buyers Make That Costs Them the Most Money 07:20 - The Working Capital Trap: How Buyers End Up $100K Apart From Sellers Halfway Through a Deal 13:43 - Why the Cheapest Time to Ask Questions Is Before the LOI - And How Most Buyers Get This Completely Backwards 19:50 - What AI Cannot Replicate in an M&A Deal: Pattern Recognition, Human Behaviour and Deal Empathy 23:30 - HoldCo Structures Explained: How to Set Up Your Portfolio the Right Way Before Your First SBA Close 35:39 - The Google Ads Red Flag: How a Seller Called Declining Traffic "Stable" and What It Really Meant 41:29 - Deal Psychology: Why the Glue of Every Deal Is the Relationship, Not the Data
Key Takeaways ➥ The LOI is not a formality - it's the foundation. Everything that goes wrong mid-deal or at closing can almost always be traced back to something that wasn't properly thought through before that document was signed. ➥ Speed without preparation isn't a competitive advantage. It's how you become the buyer who gets the door slammed in their face after wasting thirty thousand dollars in sunk costs. ➥ Working capital is not a detail to sort out later. If you don't align on it at LOI, you'll be renegotiating it under pressure - and that's when deals die or buyers get burned. ➥ AI is a tool, not a practitioner. It can hand you a checklist. It cannot tell you how this deal is going to play out, why the seller is hesit
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