Letter of Intent Template for Acquiring a Charter Bus Company

Parties and Business Description

Identifies the buyer entity, the seller entity, and the specific business being acquired. In charter bus transactions, this section should clearly identify the operating entity, the DOT operating authority number, and whether the acquisition targets the business assets or the legal entity (stock purchase vs. asset purchase).

💡 Sellers should confirm early whether the buyer is acquiring assets or stock, as this has major tax implications. Asset purchases are more common in this industry because buyers want to avoid inheriting unknown liabilities, including unresolved DOT violations or driver-related claims. Clearly defining whether DOT authority transfers or whether the buyer will apply for their own authority is critical and should be resolved before the LOI is signed.

Purchase Price and Valuation Basis

States the proposed total purchase price and how it was derived, including the relative allocation between fleet assets, customer contracts, and goodwill. Charter bus businesses in the lower middle market typically trade at 2.5x–4.5x EBITDA, with fleet condition and contract quality as primary valuation drivers.

💡 Buyers should push for a purchase price adjustment mechanism tied to the results of independent fleet inspections. If pre-LOI discussions reveal deferred maintenance or aging vehicles, negotiate a clear formula — for example, a dollar-for-dollar reduction for any fleet deficiency exceeding $50,000 identified during due diligence. Sellers should resist broad price adjustment language without defined caps and specific triggering conditions.

Deal Structure and Financing

Outlines how the transaction will be financed, including SBA 7(a) loan proceeds, buyer equity, and any seller financing component. Charter bus acquisitions are frequently SBA-eligible, with lenders scrutinizing fleet collateral value, DOT compliance history, and customer contract stability.

💡 SBA lenders will require an independent business valuation and will scrutinize fleet collateral carefully. Buses older than 10–12 years may receive limited collateral credit, which can affect loan sizing. Sellers who want to maximize cash at close should be prepared to accept a seller note, as most SBA transactions in this industry include a subordinated seller financing component of 10–20%. Sellers should negotiate for a personal guarantee from the buyer entity and, if possible, a security interest in specific fleet assets.

Earnout Provisions

Defines any contingent payment tied to post-closing performance, most commonly used in charter bus deals when significant revenue is tied to a small number of contracts whose renewal is uncertain at the time of closing.

💡 Earnouts are common in charter bus deals where one or two institutional clients (a school district, casino, or sports team) represent a significant portion of revenue and their contracts are approaching renewal at closing. Sellers should push for earnout measurement periods that are at minimum 12–24 months and should negotiate specific protections preventing the buyer from redirecting bookings in ways that artificially deflate earnout-eligible revenue. Buyers should define earnout triggers narrowly to account for seasonal revenue fluctuations typical in the charter industry.

Assets Included and Excluded

Explicitly lists which fleet vehicles, contracts, licenses, and tangible assets are included in the transaction, and which — if any — are retained by the seller. This section is especially important in charter bus deals given the high per-unit value of motorcoaches.

💡 Buyers must be specific about which buses are included and insist that all Schedule A vehicles receive independent mechanical inspections prior to closing. Sellers have been known to quietly retire older buses from the fleet after LOI signing without price adjustment. A clear schedule with VINs and a covenant preventing Seller from removing or replacing fleet assets without buyer consent is essential. Real property is often excluded and handled via a separate lease, which buyers should negotiate simultaneously to avoid post-closing disputes.

Due Diligence Period and Contingencies

Establishes the length of the due diligence period and the specific conditions that must be satisfied for the buyer to proceed to closing, including fleet inspections, DOT compliance review, financial verification, and customer contract review.

💡 The DOT safety rating contingency is non-negotiable for any sophisticated buyer — a Conditional or Unsatisfactory rating can make the business uninsurable or unlendable. Buyers should also insist on a driver retention contingency, particularly if the seller has long-tenured drivers who may retire alongside the owner. Sellers should push to cap the due diligence period at 45–60 days with a defined extension mechanism, as extended timelines increase the risk of key employee or client attrition during the sales process.

Exclusivity and No-Shop Provision

Prevents the seller from marketing the business or entertaining other offers during the due diligence and negotiation period, protecting the buyer's investment of time and capital in the transaction process.

💡 Sixty days is a reasonable exclusivity window for charter bus transactions given the complexity of fleet inspections and DOT compliance review. Buyers seeking SBA financing may need up to 90 days due to lender processing timelines. Sellers should resist exclusivity periods exceeding 75 days without a buyer milestone obligation — for example, requiring the buyer to deliver an SBA lender term sheet within 30 days or forfeit exclusivity. This protects sellers from tire-kickers who use the LOI to block the market without genuine financing capability.

Transition and Seller Involvement

Defines the seller's post-closing role, including any consulting, training, or operational transition period to ensure continuity of dispatch operations, customer relationships, and driver management.

💡 Charter bus businesses are highly relationship-driven, and an abrupt ownership transition can accelerate client and driver attrition. Buyers should push for a minimum 90-day active transition with defined deliverables, particularly around institutional contract introductions (school districts, casinos, and corporate accounts often require personal relationship transfers). Sellers who plan to retire should factor transition obligations into their post-closing calendar and push back on consulting periods exceeding 12 months without meaningful compensation.

Non-Compete and Non-Solicitation

Restricts the seller from competing with the acquired business or soliciting customers, drivers, or employees for a defined period and geographic area following the closing.

💡 A 3-year, 150-mile radius non-compete is standard and enforceable in most states for a bona fide business sale. Buyers in rural or less competitive markets may seek a broader radius; buyers in dense metro markets may focus more on specific customer and driver non-solicitation than geographic restriction. Sellers should negotiate carve-outs for any personally owned vehicles used for non-commercial purposes and should ensure the non-compete does not prevent passive investment in unrelated transportation businesses.

Confidentiality

Requires both parties to maintain the confidentiality of all proprietary information exchanged during due diligence, including financial records, customer contracts, driver rosters, and fleet valuations.

💡 Confidentiality is particularly sensitive in charter bus transactions because customer relationships are personal and community-based. If employees, drivers, or institutional clients learn the business is for sale prematurely, it can trigger departures or contract non-renewals that destroy deal value. Both parties benefit from a robust confidentiality provision. Sellers should insist that buyer's lenders and inspectors sign NDAs before accessing customer contract information or speaking with key employees.