Letter of Intent Template for Acquiring a Brand Design Studio

Parties and Transaction Overview

Identifies the buyer, seller, and the legal entity being acquired (asset purchase or stock purchase), and briefly describes the nature of the business being transferred, including the studio's primary service lines and client base.

💡 Sellers should confirm whether the deal will be structured as an asset purchase or stock purchase before signing. Most brand design studio acquisitions are structured as asset purchases to allow buyers to exclude unknown liabilities — particularly undocumented work-for-hire disputes or contractor misclassification exposure. Buyers should name the specific entity acquiring the assets to avoid ambiguity if the acquirer uses a holding company or SPV structure.

Purchase Price and Valuation Basis

States the total proposed consideration, the valuation methodology used (typically a multiple of EBITDA or SDE), and how the price is allocated across tangible assets, client relationships, and intangible assets including creative IP and brand reputation.

💡 Brand design studios typically trade at 3x–5.5x EBITDA depending on retainer revenue concentration, vertical niche strength, and key person dependency. Sellers with 40%+ recurring retainer revenue and a documented second-in-command creative lead can credibly defend multiples toward the high end. Buyers should push for a detailed EBITDA add-back schedule at this stage — personal vehicle expenses, owner health insurance, and discretionary travel are common add-backs in founder-operated studios but must be verified against bank statements and tax returns before the LOI becomes binding.

Deal Structure and Payment Terms

Outlines how the purchase price will be paid, including the cash-at-close portion, any seller note, earnout structure, and equity rollover if applicable.

💡 For SBA-financed deals, the seller note must be on full standby for the SBA loan term — typically 10 years — which sellers sometimes find surprising. Earnouts in brand design studio acquisitions are most commonly tied to retainer revenue retention (e.g., 85% of retainer ARR maintained at 12 months post-close) rather than total revenue, since project revenue can fluctuate legitimately. Equity rollovers of 10–30% are increasingly common when a creative director founder is staying on, as they align incentives and give the seller upside in the combined entity.

Earnout Structure and Client Retention Milestones

Defines the specific metrics, measurement periods, and payout mechanics of any earnout, with particular attention to retainer client retention rates and revenue thresholds tied to client transition success.

💡 Sellers should push hard to define exactly which clients and contracts constitute baseline Retainer ARR at close — this list should be attached as an exhibit to the LOI and finalized in the purchase agreement. Buyers should resist earnouts based on total revenue because project-based revenue is too easily manipulated through timing. Both parties should agree in advance on how client losses due to macro factors (recession, client M&A) are treated. Sellers staying on in a creative director role should also negotiate a carve-out that prevents the buyer from materially changing service pricing or scope in a way that artificially triggers client churn.

Key Person and Transition Obligations

Addresses the founder's or lead creative director's post-closing role, compensation, duration of involvement, and the terms under which the transition of client relationships, creative leadership, and institutional knowledge will occur.

💡 This is often the most emotionally charged section for founder-sellers who have deep personal identity tied to their studio. Buyers should frame the transition role as a creative leadership position, not a sales or administrative one, to preserve the seller's engagement and motivation. Sellers should negotiate explicit protections that earnout milestones cannot be sabotaged by the buyer's failure to staff or resource client work appropriately. Both parties benefit from specifying what 'introduction' of new contacts means operationally — a warm email is not sufficient; joint client calls and in-person meetings should be specified.

Intellectual Property Transfer

Confirms that all creative work product, brand systems, proprietary frameworks, logo archives, client deliverables, trademarks, and domain assets are owned by the business entity and will transfer to the buyer, and outlines any representations the seller makes about IP cleanliness.

💡 IP verification is one of the highest-risk areas in brand design studio acquisitions. Many founder-operated studios have used freelance contractors over the years without proper work-for-hire agreements, meaning those contractors may technically retain copyright in deliverables created for the studio's clients. Buyers should require a complete IP audit as a condition of proceeding past the LOI stage. Sellers who identify gaps before going to market can clean these up by obtaining retroactive IP assignment agreements from former contractors — an inexpensive fix that materially reduces buyer risk and supports a higher valuation.

Due Diligence Scope and Timeline

Defines the due diligence period, the scope of information the buyer is entitled to review, and any conditions that must be satisfied before the buyer is obligated to proceed.

💡 Sixty days is a reasonable due diligence window for a brand design studio in the $1M–$5M revenue range, though SBA lenders may require additional time for their own underwriting. Sellers should prepare a data room before signing the LOI to accelerate this process and signal operational maturity — disorganized financials or missing contracts during due diligence are among the most common deal killers. Buyers should prioritize the client concentration analysis and IP audit in the first two weeks, as these are the most likely sources of material surprises.

Exclusivity and No-Shop Provision

Grants the buyer an exclusive negotiating period during which the seller agrees not to solicit, entertain, or advance discussions with other potential acquirers.

💡 Sellers should resist exclusivity periods longer than 60 days unless the buyer has demonstrated concrete financing commitments or SBA pre-approval. Buyers who need more than 60 days for due diligence in a deal of this size are often a signal of underprepared buyers or deals with material complexity. Sellers should also ensure the LOI specifies that exclusivity is conditioned on the buyer's good faith progress — an extension should require mutual written consent, not be automatic.

Confidentiality and Non-Disclosure

Confirms that both parties will maintain confidentiality about the existence and terms of the transaction, the contents of due diligence materials, and the identity of the counterparty.

💡 Confidentiality is particularly sensitive in brand design studio acquisitions because the studio's clients, employees, and referral network are tightly interconnected. If key creatives or top clients hear about a potential sale before the deal closes, talent departures and client churn can materially erode value. Sellers should insist that buyer's SBA lenders, legal counsel, and any platform employees involved in diligence sign individual NDAs or be explicitly bound by the LOI confidentiality provision.

Binding vs. Non-Binding Provisions

Clarifies which sections of the LOI are legally binding on both parties and which represent non-binding expressions of intent subject to definitive documentation.

💡 Making clear which provisions are binding versus non-binding protects both parties. Buyers want flexibility to adjust price and structure if due diligence reveals material issues; sellers want certainty that the buyer can't walk away without consequence during the exclusivity period. Both parties should have independent legal counsel review the LOI before signing — the cost of an attorney reviewing a 5–8 page LOI is trivial relative to the stakes of a $2M–$5M transaction.