Letter of Intent Template for Acquiring a Craft Brewery or Taproom Business

Buyer and Seller Identification

Clearly identify the acquiring entity, the target brewery or craft beverage business, and the legal entities involved on both sides. Specify whether the buyer is an individual, an LLC formed for acquisition, or a strategic operator. For brewery acquisitions, it is important to note the buyer's intent to apply for or transfer applicable federal TTB permits and state brewery licenses, as regulators will require documentation of the new ownership entity.

💡 Sellers should confirm the buyer's entity is properly formed or in formation and request evidence that the buyer has consulted with a beverage alcohol attorney regarding license transfer timelines in the relevant state. Buyers should avoid committing to a specific closing date without first understanding how long the state brewery license transfer will take — this varies from 30 days to 6+ months depending on jurisdiction.

Purchase Price and Valuation Basis

State the proposed purchase price and the valuation methodology used to arrive at it. Brewery valuations in the lower middle market typically apply a 2.5x–4.5x EBITDA multiple depending on revenue mix, equipment condition, brand strength, and distributor coverage. Buyers should reference seller-provided financials and note any adjustments made to normalize EBITDA, such as removing owner compensation above market rate or adding back one-time capital expenditures.

💡 Sellers often anchor to top-line revenue multiples or replacement cost of equipment rather than EBITDA multiples — especially when EBITDA is compressed by owner salary or deferred investment. Buyers should be prepared to walk through their EBITDA normalization assumptions in detail. If the seller has significant real estate, the LOI should specify whether real property is included in the purchase price or structured as a separate lease or purchase transaction.

Deal Structure and Asset Allocation

Define whether the transaction is structured as an asset purchase or equity purchase, and outline the preliminary allocation of the purchase price across key asset categories. Brewery acquisitions are almost universally structured as asset purchases for tax and liability reasons, with the buyer acquiring brewing equipment, inventory, recipes, brand assets, customer lists, distributor agreements, and leasehold interests while leaving behind pre-closing liabilities.

💡 Sellers should pay close attention to how the purchase price is allocated between equipment and goodwill, as this has direct tax implications. Buyers seeking SBA financing should be aware that SBA lenders will require an independent equipment appraisal and may limit the goodwill allocation relative to tangible asset values. If the seller owns the real estate, structure the real property as a separate transaction or long-term lease with right of first refusal to keep the business acquisition SBA-eligible.

Financing Contingency and Proof of Funds

Disclose the buyer's intended financing approach and any contingencies tied to financing approval. Most craft brewery acquisitions in this size range are financed through SBA 7(a) loans covering 80–90% of the purchase price, combined with a seller note of 5–10% and a buyer equity injection of 10%. Clearly stating the financing structure gives the seller confidence in the buyer's ability to close and sets expectations around timing.

💡 Sellers should request proof of the buyer's liquid capital for the equity injection — not just pre-qualification letters. Buyers should understand that SBA lenders will conduct their own environmental review of the brewery facility, equipment appraisal, and business valuation, which can add 4–8 weeks to the closing timeline. If the seller is carrying a note, negotiate for a subordination agreement acceptable to the SBA lender early in the process to avoid surprises at closing.

Earnout Provisions

Define any performance-based earnout tied to post-closing business metrics. Brewery acquisitions frequently include earnouts tied to wholesale distributor revenue retention and taproom sales performance in the 12–24 months following close, particularly when distributor relationships or taproom traffic are tied to the seller's personal relationships or reputation. A well-structured earnout protects the buyer against revenue loss while giving the seller the opportunity to be compensated for the value they help retain.

💡 Sellers should push for earnout metrics they can meaningfully influence during a transition period rather than metrics entirely dependent on buyer execution. Buyers should tie earnout triggers to absolute revenue thresholds rather than growth targets to avoid disputes. Both parties should agree in advance on how earnout revenue will be tracked and reported, and whether earnout payments will be subject to any offset for indemnification claims.

Due Diligence Scope and Timeline

Outline the due diligence process, timeline, and key information requests specific to the brewery acquisition. Brewery due diligence is more complex than most small business acquisitions due to regulatory licensing, equipment condition, distributor agreement review, and COGS analysis. The LOI should specify a defined due diligence period and identify the primary workstreams the buyer intends to pursue.

💡 Sellers should prepare a due diligence data room prior to LOI execution to avoid delays. Buyers should engage a beverage alcohol attorney alongside their general M&A counsel — TTB and state licensing review requires specialized knowledge that most generalist attorneys lack. If equipment appraisal reveals significant deferred maintenance or replacement needs, use this as a basis for price renegotiation rather than deal termination where possible.

Exclusivity and No-Shop Provision

Establish an exclusivity period during which the seller agrees not to solicit, entertain, or negotiate with other potential buyers. Exclusivity protects the buyer's investment of time and due diligence costs while giving both parties a focused window to work toward a definitive agreement. The exclusivity period for a brewery acquisition should be long enough to accommodate licensing review and SBA lender timelines.

💡 Sellers should limit exclusivity to no more than 60–75 days unless the buyer can demonstrate meaningful progress milestones at defined intervals. Buyers should avoid agreeing to exclusivity before receiving at least a preliminary financial package from the seller — exclusivity without visibility into the business's financials puts the buyer at a disadvantage. Consider adding a buyer milestone requirement (e.g., delivery of SBA pre-qualification within 10 business days) to keep both parties accountable during exclusivity.

Confidentiality and Non-Disclosure

Affirm that both parties are bound by confidentiality obligations regarding the existence of discussions and any proprietary information exchanged. In brewery acquisitions, this is especially important for protecting recipe formulations, distributor pricing agreements, taproom customer data, and the seller's plans to exit — which, if disclosed prematurely, could affect employee morale, distributor relationships, and taproom revenue.

💡 If a separate NDA has not already been executed, the LOI's confidentiality section must be explicit and binding. Sellers should be particularly protective of recipe IP, customer loyalty data, and distributor pricing — these are competitive assets that, if disclosed to a failed buyer, could create real business harm. Buyers should ensure the confidentiality clause covers their financing sources and lender representatives who will receive business information during underwriting.

Seller Transition and Non-Compete

Outline expectations for the seller's post-closing involvement in transitioning relationships, training the incoming operator, and any non-compete or non-solicitation restrictions. In brewery acquisitions, seller transition support is critical for introducing the buyer to key distributors, transferring brewing knowledge and SOPs, and maintaining taproom staff morale. Non-compete provisions must be reasonable in geographic scope and duration.

💡 Sellers should negotiate the transition period and compensation structure carefully — unpaid 90-day obligations can feel onerous after handing over the keys. Consider a paid consulting agreement for the first 30–60 days if the transition workload is significant. Buyers should ensure the non-compete geographic radius aligns with the brewery's actual distribution footprint, not just the taproom location. Courts have invalidated overly broad non-competes, so work with counsel to ensure enforceability.

Binding and Non-Binding Provisions

Clearly state which sections of the LOI are legally binding and which are expressions of intent subject to negotiation in the definitive purchase agreement. Standard practice is to make only the confidentiality, exclusivity, and governing law sections binding, while all other terms — including price, structure, and earnout — remain non-binding until a definitive agreement is executed.

💡 Both parties must understand that a signed LOI does not obligate either party to complete the transaction — it simply creates a structured process for moving toward a definitive agreement. Sellers who confuse LOI acceptance with a committed sale are at risk of disrupting operations, notifying employees, or declining other buyer conversations prematurely. Buyers should not assume exclusivity or confidentiality obligations are enforceable unless they are explicitly identified as binding in the LOI.