Letter of Intent Template for Acquiring an Autism Therapy Center

Identification of Parties and Business

Clearly identify the buyer entity, the seller, and the target business being acquired. In ABA acquisitions, this section should specify whether the transaction is an asset purchase or stock purchase, which has direct implications for Medicaid and commercial payor contract continuity and state licensure transfer.

💡 Asset purchases are strongly preferred by buyers in ABA acquisitions because they allow buyers to step into credentialing fresh and avoid inheriting unknown billing liabilities, prior Medicaid audit exposure, or outstanding overpayment demands. Sellers often prefer stock sales for tax efficiency. Expect this to be a significant negotiation point. If agreeing to a stock purchase, buyers should insist on expanded representations and warranties coverage or a rep-and-warranty insurance policy given the elevated billing compliance risk in behavioral health.

Purchase Price and Valuation Basis

State the proposed total enterprise value, the valuation methodology used, and the baseline financial metrics the price is anchored to. ABA therapy centers typically trade at 3.5x to 6x EBITDA depending on BCBA staffing depth, payor mix quality, and census stability.

💡 In ABA therapy center acquisitions, EBITDA adjustments are common and often contentious. Sellers frequently add back owner compensation above market rate, personal expenses run through the business, and one-time recruiting or credentialing costs. Buyers should insist on normalizing BCBA compensation to market rates — typically $75,000 to $110,000 annually depending on region — before accepting adjusted EBITDA figures. Additionally, validate that revenue figures reflect net collections after payor contractual adjustments and denial write-offs, not gross billed charges, which can overstate true revenue by 20% or more.

Deal Structure and Financing

Outline how the purchase price will be funded, including any SBA loan, seller financing, equity rollover, or earnout component. ABA acquisitions commonly combine SBA 7(a) financing with a seller note and occasionally a partial equity rollover to bridge valuation gaps and retain seller engagement post-close.

💡 SBA 7(a) financing is well-suited for ABA therapy center acquisitions under $5M in enterprise value when the business has at least two years of clean tax returns and is not majority Medicaid-dependent beyond 60–65% of revenue. Lenders will scrutinize payor concentration heavily — a center deriving more than 70% of revenue from a single state Medicaid program may face loan sizing limitations. A seller note of 10–20% of purchase price is often required by SBA lenders to demonstrate seller confidence and align incentives. If the seller is also retaining an equity stake, ensure the rollover percentage and vesting conditions are clearly defined to avoid ambiguity at closing.

Due Diligence Period and Access

Define the due diligence timeline, the scope of information to be provided, and any confidentiality obligations during the review period. ABA-specific diligence requires access to clinical, credentialing, billing, and compliance records that are governed by HIPAA and state privacy laws.

💡 Forty-five to sixty days is a realistic minimum for ABA therapy center diligence given the volume of payor-specific and credentialing documentation involved. Buyers should allocate at least two weeks specifically to billing compliance review — including claims history going back 24–36 months, denial rates by payor, and any Medicaid audit correspondence. Sellers should prepare a clean diligence data room in advance including credentialing files for all BCBAs and RBTs, copies of all active payor contracts, and three years of financial statements reconciled against billing software reports. Incomplete or disorganized records are the single most common cause of deal delays in ABA acquisitions.

BCBA Staffing and Clinical Continuity Contingency

Establish specific staffing thresholds that must be maintained through closing as a condition of Buyer's obligation to proceed. BCBA retention is the most critical operational risk in any ABA therapy center acquisition, and LOIs should address it explicitly rather than leaving it to the definitive agreement.

💡 This is among the most important contingencies in any ABA LOI and is frequently underspecified or omitted entirely by inexperienced buyers. The loss of even one BCBA at a smaller center can trigger authorization lapses, payor credentialing gaps, and client attrition that erode 15–25% of revenue before a buyer can backfill the position. Sellers should be prepared to demonstrate BCBA loyalty through multi-year employment agreements, competitive compensation benchmarking, and evidence of low historical turnover. Buyers should consider allocating a portion of the seller note or earnout as a BCBA retention pool distributed post-close if key staff remain employed for six to twelve months.

Payor Contract and Medicaid Credentialing Contingency

Address the risk of revenue disruption caused by payor re-enrollment requirements following a change of ownership. Many state Medicaid programs and commercial insurers require re-credentialing of both the practice and individual clinicians upon ownership transfer, which can create 60–180 day revenue gaps.

💡 Payor credentialing continuity is the most underappreciated operational risk in behavioral health acquisitions. Asset purchases typically trigger mandatory re-enrollment with Medicaid, which can take 90 to 180 days in states like California, New York, and Texas. During this window, the acquiring entity cannot bill under its own provider number and must bridge through the seller's credentials — which is permissible in some states and prohibited in others. Buyers should consult a healthcare attorney with specific state Medicaid experience before LOI execution. Stock purchases can sometimes preserve existing provider numbers but introduce different liability risks. Budget for a working capital bridge of 60 to 90 days of operating expenses to cover the re-enrollment gap.

Exclusivity and No-Shop Provision

Grant the buyer an exclusive negotiation period during which the seller agrees not to solicit, entertain, or negotiate with other potential acquirers. This is standard in lower middle market M&A and protects the buyer's investment in due diligence.

💡 Sixty days is a reasonable exclusivity window for single-site ABA centers with clean records; ninety days is more appropriate for multi-site or higher-complexity transactions. Sellers should resist indefinite exclusivity without a clear diligence milestone schedule that holds the buyer accountable to moving efficiently. Buyers should include a provision that extends exclusivity automatically if they are awaiting SBA lender commitment or state licensure confirmation, which are third-party delays outside the buyer's control. Avoid open-ended exclusivity clauses that stall the sale process without meaningful progress benchmarks.

Seller Transition and Non-Compete Agreement

Define the seller's post-close involvement in the business including transition consulting obligations, compensation for the transition period, and geographic and temporal scope of any non-compete or non-solicitation agreement.

💡 Owner transition length is directly correlated with business transferability in ABA centers. When the seller is also the primary clinical director or sole BCBA, twelve months of transition is often insufficient — buyers should consider a phased transition structure where the seller steps back from direct clinical supervision gradually rather than abruptly. Non-compete geographic radius should reflect local market density: a 25-mile radius is appropriate in suburban markets but may need to be reduced to 10–15 miles in dense urban areas. Non-compete enforceability varies significantly by state — California, for example, largely prohibits them — so consult local legal counsel before finalizing terms.

Confidentiality and Binding Effect

Clarify which provisions of the LOI are legally binding and which are non-binding statements of intent. In standard M&A practice, only confidentiality, exclusivity, governing law, and expense allocation provisions are typically binding in an LOI.

💡 Buyers and sellers often misunderstand what an LOI actually obligates them to. Clarify in writing that the non-binding sections are expressions of intent only and that either party may walk away without liability if the definitive purchase agreement cannot be reached. However, courts have in some cases found LOIs binding when language is sufficiently specific and conduct implies acceptance — which is why the binding/non-binding carve-out language must be explicit. Sellers should be cautious about sellers who treat the LOI as a final agreement and become resistant to customary definitive agreement provisions that differ from LOI language.