Letter of Intent Template for Acquiring a Demolition Company

Parties and Transaction Overview

Identifies the buyer entity, the seller, and the legal name of the target business. For demolition acquisitions, this section should also note whether the transaction is structured as an asset purchase or stock purchase, which has significant implications given potential environmental liabilities embedded in the company's history.

💡 Asset purchase structures are strongly preferred by buyers in demolition acquisitions to avoid inheriting historical environmental liabilities embedded in the entity. Sellers, particularly those with clean compliance records, may push for a stock sale for tax efficiency. If the seller insists on a stock sale, buyer should require enhanced environmental representations, an indemnification escrow, and environmental insurance as a condition of closing. Clarify upfront which licenses and permits are transferable in an asset deal versus which must be re-applied for, as this varies by state and affects deal timing.

Purchase Price and Valuation Basis

States the proposed total enterprise value, how it was derived, and what it includes. For demolition businesses, the purchase price must clearly address whether the equipment fleet, real property, backlog, and goodwill are included, since equipment can represent 40–60% of total asset value in this industry.

💡 Equipment valuation is often the most contentious element of the purchase price in demolition deals. Sellers tend to value their fleet at replacement cost while buyers apply forced liquidation or orderly liquidation values. Engage an independent heavy equipment appraiser early in due diligence and tie the LOI purchase price to an equipment appraisal contingency. For older fleets with deferred maintenance, buyers should negotiate a purchase price adjustment mechanism rather than accepting the risk post-close. EBITDA add-backs should be scrutinized carefully — owner compensation, personal vehicles, and one-time project costs are common in this industry.

Deal Structure and Financing

Outlines how the purchase price will be funded across equity, SBA debt, seller financing, and any earnout. Demolition acquisitions at this revenue range are frequently financed via SBA 7(a) loans, which impose specific requirements on deal structure, seller note subordination, and injection amounts.

💡 SBA lenders will scrutinize demolition businesses closely given equipment-heavy balance sheets and environmental exposure. Prepare for the lender to require an environmental Phase I assessment and potentially a Phase II if any red flags appear. The seller note must be fully subordinated to the SBA lender, meaning no payments during the standby period — sellers unfamiliar with SBA deals often resist this and need it explained early. If an earnout is included, ensure it is tied to measurable metrics like revenue from existing GC relationships or backlog conversion rather than subjective performance targets.

Earnout Provisions

Defines any contingent consideration tied to post-close performance, which is common in demolition acquisitions where owner-dependent GC relationships create uncertainty about revenue retention after the seller departs.

💡 Earnouts in demolition deals are most defensible when tied to specific, named GC or municipal relationships — not aggregate company revenue, which the buyer controls. Sellers should push for a definition of 'retained revenue' that excludes projects lost due to buyer operational decisions rather than relationship attrition. Buyers should insist that the earnout only activates if the seller remains available for introductions and transition support throughout the earnout period, typically via a consulting agreement. Tie earnout mechanics to job cost reporting that already exists in the seller's accounting system to avoid disputes.

Assets Included and Excluded

Provides a clear enumeration of what transfers with the business. In demolition acquisitions, this section is critical because the equipment fleet, environmental permits, subcontractor agreements, and bonding capacity all have material value and must be explicitly addressed.

💡 Bonding capacity is frequently overlooked in demolition LOIs and can be a deal-breaker if not addressed early. Surety bonds are issued to the legal entity and are not transferable in an asset deal — the buyer must establish their own bonding relationship, which takes time and requires financial qualification. If the seller's bonding capacity is essential to bid on government or large GC projects, structure the deal to allow the seller entity to remain in place temporarily or give the buyer adequate runway post-LOI to establish new bonding. Equipment titles should be verified early — many demolition operators have equipment titled under personal names, affiliated entities, or with liens that complicate the transfer.

Environmental and Regulatory Representations

Addresses the seller's obligation to disclose known environmental liabilities, open regulatory violations, and the history of hazardous material abatement work. This section is unique to demolition and abatement acquisitions and should not be omitted from the LOI.

💡 Environmental representations in an LOI create the foundation for the indemnification provisions in the definitive purchase agreement. Sellers with clean records should embrace these representations as a selling point — if they resist, it signals undisclosed issues. Buyers should require that all environmental documentation — waste manifests, asbestos survey reports, disposal certificates, OSHA 300 logs — be provided as part of the due diligence data room on Day 1. If Phase II is required, negotiate who bears the cost and establish a threshold above which environmental remediation constitutes a deal-termination right for the buyer. Consider requiring environmental liability insurance as a condition of close if legacy abatement work is significant.

Due Diligence Period and Access

Establishes the timeline, scope, and access rights for buyer's investigation of the business prior to executing the definitive purchase agreement. Demolition due diligence typically requires 60–90 days given the complexity of equipment appraisals, environmental reviews, and backlog verification.

💡 90 days is the realistic minimum for a demolition acquisition involving SBA financing, an equipment appraisal, and environmental review. Buyers should resist pressure to compress this timeline. Request the due diligence data room be populated within the first 10 days so that the equipment appraiser and environmental consultant can be engaged immediately — both have long lead times. For sellers concerned about confidentiality, limit employee interviews to key management only until the deal is substantially confirmed, and use a tiered disclosure approach where sensitive customer and subcontractor information is provided only after the buyer has passed initial financial review.

Exclusivity

Prevents the seller from soliciting or entertaining other offers during the due diligence period. This is standard in lower middle market acquisitions and protects the buyer's investment in the due diligence process.

💡 Sellers should push for a shorter exclusivity window or tie it to buyer milestone obligations — for example, requiring the buyer to engage an SBA lender and submit a loan application within 15 days of LOI execution. This protects the seller from a buyer who locks up the deal with no real intent to close. Buyers should ensure exclusivity extends through at least the completion of environmental review and equipment appraisal, since these are the most likely sources of retrade or deal termination. If the seller is working with a business broker, confirm that the broker's obligations to the seller do not conflict with the exclusivity terms.

Conditions to Closing

Lists the material contingencies that must be satisfied before the buyer is obligated to close. In demolition acquisitions, these conditions are more extensive than in service businesses and should explicitly cover environmental, equipment, licensing, and bonding requirements.

💡 The material adverse change condition is especially important in demolition because a single large GC relationship departure or a key foreman resignation between LOI and close can fundamentally alter the business's value. Define 'material adverse change' specifically — for example, a loss of any client representing more than 15% of trailing revenue, or the departure of the lead estimator or operations manager. Sellers should push to narrow this condition to specific, objectively defined events rather than a broad subjective standard. Equipment appraisal variance thresholds should be set at no more than 10–15% below the assumed value before triggering a purchase price adjustment.

Transition and Non-Compete

Outlines the seller's obligations to support the transition of GC relationships, crew management, and operational knowledge post-close, as well as geographic and time restrictions on competitive activity.

💡 The transition period is arguably the most valuable element of a demolition acquisition and should be treated as such by both parties. GC and municipal relationships in this industry are built over years of personal trust and project delivery — they do not transfer automatically with the business name. Buyers should tie a portion of the earnout or seller note to active transition participation, not just passive availability. Non-compete geography should reflect the actual markets the company serves and bids in, not just the company's home county. A 50-mile radius may be too narrow for a contractor that bids regionally; 100–150 miles is more defensible in most markets. Five-year non-competes are enforceable in most states at this deal size.

Confidentiality and No-Shop

Binds both parties to keep the terms of the LOI and all due diligence materials confidential, and restricts the seller from using the buyer's interest to shop competing offers.

💡 Confidentiality is especially important in demolition acquisitions because word of a pending sale can trigger customer anxiety, crew departures, and subcontractor uncertainty — all of which erode deal value before close. Sellers should be counseled to limit internal disclosure to the minimum necessary, ideally only the owner and their CFO or accountant. Buyers should insist that any disclosure to lenders or advisors be covered by their own NDAs. The no-shop provision reinforces exclusivity but from a different angle — make sure both provisions are consistent in duration and scope.