Letter of Intent Template for Acquiring an After-School Program

Identification of Parties and Business

Clearly identifies the buyer, seller, and the specific legal entity or assets being acquired. For after-school programs, specify whether you are purchasing the LLC or corporation outright (stock purchase) or acquiring specific assets including the license, enrollment contracts, curriculum, and equipment (asset purchase). Most after-school acquisitions are structured as asset purchases to allow the buyer to obtain a fresh childcare license in their name.

💡 Sellers who have operated for many years under a known program name will care deeply about brand continuity. Acknowledging the program name and goodwill explicitly in this section builds trust. Clarify early whether the childcare license is transferable in your state or whether a new license application is required — this affects the closing timeline by weeks or months and should be reflected in your LOI timeline provisions.

Purchase Price and Valuation Basis

States the proposed total consideration and explains the basis for the valuation. After-school programs in the lower middle market typically trade at 2.5x to 4.5x Seller's Discretionary Earnings (SDE). Your LOI should anchor the price to a specific SDE figure derived from the seller's financials, with language noting that the final price is subject to verification during due diligence. This protects you if the books reveal add-backs that do not hold up.

💡 Sellers of long-standing community programs often anchor to emotional value rather than financial multiples. Come prepared with comparable transaction data showing the 2.5x–4.5x SDE range for licensed childcare businesses. If the seller insists on a higher multiple, explore whether an earnout tied to post-close enrollment levels can bridge the gap without exposing you to overpaying for goodwill that may not transfer.

Deal Structure and Payment Terms

Outlines how the purchase price will be funded, including the breakdown between buyer equity, SBA financing, seller note, and any earnout component. After-school program acquisitions frequently use SBA 7(a) loans given the program's asset-light, cash-flowing nature. A seller note of 5–10% of purchase price is common and signals the seller's confidence in the transition. Earnouts tied to enrollment retention over 12–24 months are increasingly standard.

💡 The earnout tied to enrollment retention is the most seller-friendly protection mechanism in this industry and often the key to closing a deal where price expectations are misaligned. Negotiate the measurement metric carefully — use signed enrollment agreements, not just attendance records, to avoid disputes. Sellers should push for a shorter earnout window (12 months) while buyers prefer 24 months to capture at least one full school-year cycle.

Due Diligence Period and Access

Defines the length and scope of the due diligence period and the seller's obligations to provide access to records, staff, facilities, and regulatory documentation. After-school programs require specialized due diligence covering state childcare licensing history, staff background check files, enrollment data, and subsidy billing records that are not present in typical small business transactions.

💡 Sellers are often protective of staff conversations during due diligence out of fear of triggering staff anxiety about a sale. Negotiate limited but direct access to the lead program director — this individual is often the single most important retention risk in the deal. Frame staff conversations as introductions rather than evaluations to reduce seller resistance. Also request licensing inspection reports proactively; sellers sometimes omit prior violations assuming they have been resolved.

Exclusivity and No-Shop Provision

Prevents the seller from marketing the business to or negotiating with other buyers during the due diligence period. This is standard in LOIs and protects the buyer's investment of time and money in due diligence. For after-school programs, where due diligence is complex and licensing timelines are long, exclusivity is especially important.

💡 Most sellers accept a 45–60 day exclusivity window without pushback. If the seller resists, it may indicate they are running a competitive process or have a competing offer. You can offer to shorten the due diligence period in exchange for exclusivity, or propose a break-up fee paid to the seller if you walk away without cause to give them comfort that you are serious.

Transition and Training Period

Outlines the seller's commitment to remain available post-closing to support the operational transition, introduce the buyer to school partners, parent community, and staff, and transfer institutional knowledge. This is critical in after-school programs where the founder's relationships with school principals and parent networks are often the primary driver of enrollment stability.

💡 Sellers who are retiring educators or founder-operators often genuinely want to protect their program's culture and will agree to generous transition periods if framed around mission continuity rather than contractual obligation. Tie the transition consulting compensation to reasonable participation benchmarks. Request that the seller send the enrollment transition communication from their personal email or name rather than a generic business address to maximize parent trust and minimize enrollment attrition.

Conditions to Closing

Lists the specific conditions that must be satisfied before the transaction can close, including financing approval, licensing transfer, lease assignment, and staff retention milestones. After-school program closings have several unique conditions not present in other small business deals, particularly around state licensing timelines and facility zoning approvals.

💡 The childcare licensing condition is the most commonly underestimated closing risk in this industry. In some states, transferring or reissuing a childcare license can take 60–120 days and requires facility inspections, fingerprinting, and background checks for the new owner. Build this timeline explicitly into your closing schedule and negotiate a provision allowing the seller to continue operating under their existing license in a management agreement capacity while your license application is pending.

Confidentiality

Requires both parties to keep the terms of the LOI and all due diligence materials confidential. For after-school programs, confidentiality is particularly sensitive because premature disclosure to parents, school partners, or staff can trigger enrollment cancellations or staff departures before closing.

💡 The confidentiality provision in after-school acquisitions is not merely legal formality — a leak to the parent community can cause immediate enrollment cancellations that permanently impair the business value before you even close. Agree on a joint communication plan for the announcement to families and staff and draft it during due diligence so it is ready to deploy at closing with minimal delay.

Non-Binding Nature and Governing Law

Clarifies which sections of the LOI are binding (typically exclusivity, confidentiality, and governing law) and which are non-binding expressions of intent. Specifies the governing state law for the LOI and any future definitive agreement.

💡 Make the binding sections explicit by section number or heading — ambiguity about which provisions are enforceable is a common source of post-LOI disputes. Some sellers, particularly those without deal experience, assume the LOI commits both parties to closing. Walk them through the non-binding nature clearly and early to set expectations and reduce friction if you need to renegotiate price or terms after due diligence.