Letter of Intent Template for Acquiring a Commercial Printing Business

1. Parties and Transaction Overview

Identifies the buyer entity, seller entity, and the business being acquired. In commercial printing deals, specify whether the acquisition is structured as an asset purchase or a stock purchase — most print shop deals are asset purchases to allow buyers to step up equipment basis and avoid inheriting environmental liabilities related to ink, solvent, or chemical disposal.

💡 Sellers sometimes prefer stock sales for favorable capital gains treatment. Buyers should be prepared to discuss an adjusted purchase price that accounts for the tax differential if the seller pushes for a stock deal. Confirm early whether the facility is owned or leased — if leased, landlord consent for assignment is a critical parallel track item.

2. Purchase Price and Valuation Basis

States the proposed total purchase price and the methodology used to arrive at it. Commercial printing businesses in the lower middle market are typically valued at 2.5x–4.5x adjusted EBITDA. Buyers should explicitly tie the purchase price to trailing twelve-month EBITDA and include a mechanism for price adjustment if financials shift during diligence.

💡 In commercial printing, EBITDA add-backs are commonly contested. Sellers frequently add back owner salary above replacement cost, personal vehicle expenses, and one-time equipment repair costs. Buyers should request a detailed add-back schedule upfront and benchmark owner compensation against a qualified production manager or general manager salary in the local market — typically $75,000–$110,000 — before accepting normalized EBITDA figures.

3. Deal Structure and Financing

Outlines how the purchase price will be funded, including equity injection, SBA or conventional debt, seller carry, and any earnout provisions. SBA 7(a) financing is common in commercial printing acquisitions and requires specific representations from both parties.

💡 Sellers should understand that SBA lenders will require the seller note to be on full standby for the first 24 months post-close, meaning no principal or interest payments during that period. This is often a surprise to sellers and can be a deal-breaker if not disclosed early. If the business has significant real estate, a conventional USDA or SBA 504 structure may reduce the seller note requirement and improve seller cash at close.

4. Equipment Appraisal and Asset Confirmation

Establishes the buyer's right to obtain an independent equipment appraisal during diligence and defines how appraised values will affect the purchase price. This section is critical in commercial printing given the capital intensity of presses, finishing equipment, and bindery assets.

💡 Buyers should insist on an appraiser with specific commercial printing equipment experience — general industrial appraisers often misvalue specialized presses, RIP systems, and color management technology. Sellers should prepare maintenance logs in advance; undocumented equipment history is a common cause of appraisal write-downs that trigger price renegotiations.

5. Customer Concentration and Contract Review

Addresses the buyer's right to review customer revenue concentration and confirm the stability of key commercial accounts. This is a critical protection in commercial printing, where a single large account — such as a regional retailer, hospital system, or government agency — can represent an outsized share of revenue.

💡 Sellers concerned about confidentiality should propose a phased disclosure approach — aggregate revenue brackets first, then named accounts after a signed NDA and confirmed buyer financing capacity. Buyers should push for the ability to speak directly with two or three key accounts before closing, ideally framed as an introduction rather than a diligence call, to assess relationship transferability.

6. Earnout Provisions

Defines any performance-based payment tied to post-closing revenue or EBITDA targets. Earnouts are common in commercial printing deals where buyer and seller disagree on the sustainability of current revenue — particularly when a key customer relationship or niche segment is driving a disproportionate share of income.

💡 Sellers should negotiate earnout definitions carefully — specifically, whether earnout revenue is measured on a gross basis or net of new customer acquisition costs or equipment investments made post-close. Buyers should ensure the earnout does not create perverse incentives, such as the seller pushing high-margin rush jobs pre-close to inflate the trailing twelve-month baseline.

7. Seller Transition and Non-Compete

Defines the seller's post-closing obligations to train the buyer, maintain customer relationships during transition, and refrain from competing. In commercial printing, where client relationships are often built over decades and production knowledge is highly specialized, transition terms are among the most heavily negotiated LOI provisions.

💡 Sellers should negotiate the consulting arrangement as a paid engagement with defined hours — typically 20–30 hours per week — rather than an open-ended obligation. Buyers should specify that the non-compete covers not just direct print services but also broker or reseller arrangements that could redirect former clients to competitors. SBA lenders typically require a non-compete from all sellers with 20% or greater ownership stake.

8. Exclusivity and Confidentiality

Grants the buyer a defined period of exclusive negotiation during which the seller agrees not to solicit or entertain other offers. Protects the buyer's investment of time and money in due diligence while providing the seller assurance of buyer commitment.

💡 Sellers should resist exclusivity periods longer than 60 days without a clear diligence milestone schedule from the buyer. Buyers should use the exclusivity period strategically — complete the equipment appraisal, customer revenue review, and SBA lender pre-approval in parallel rather than sequentially to avoid running out of time before key findings are resolved.

9. Working Capital and Inventory

Establishes the baseline working capital to be delivered at closing, including paper stock, ink inventory, and accounts receivable. Commercial printing businesses carry meaningful inventory and often operate with net-30 to net-60 receivables, making working capital peg definitions critical to deal economics.

💡 Buyers should clarify whether pre-press materials, specialty substrates, or customer-owned stock stored on-site are included in the working capital calculation. Sellers should push for a working capital peg based on a trailing 12-month average rather than a single closing-date snapshot to avoid distortions from seasonal order patterns or large pre-close jobs that temporarily deplete inventory.

10. Conditions to Closing and Termination Rights

Lists the conditions that must be satisfied before the transaction can close, and defines each party's right to terminate the LOI or definitive agreement. Provides a clear framework for managing diligence findings, financing contingencies, and regulatory requirements.

💡 Sellers should push to include a specific definition of 'material adverse change' to avoid buyers using vague language as a pretext for renegotiation after diligence. Buyers should confirm with their SBA lender whether environmental indemnification from the seller is required — many lenders will require a Phase I environmental assessment given printing facilities' historical use of chemical solvents and inks.