Letter of Intent Template for Acquiring a Driver Education School

Parties and Transaction Overview

Identifies the buyer entity, seller entity, and the specific business assets or ownership interests being acquired. For driving schools, this section should clarify whether the transaction is an asset purchase or stock purchase, and should explicitly reference the business name, primary operating location(s), state licenses held, and the DMV-approved programs being conveyed.

💡 Sellers may prefer a stock sale for tax efficiency, but buyers — especially SBA borrowers — almost always prefer asset purchases to avoid assuming unknown liabilities. If the seller's state license is held at the entity level and cannot be easily transferred via asset sale, discuss with legal counsel whether a stock purchase or a licensing bridge arrangement is required. Clarify early whether the seller's vehicle fleet is included, as this materially affects the SBA loan collateral package and purchase price allocation.

Purchase Price and Valuation Basis

States the proposed total consideration and the valuation methodology used to arrive at it. Driver education schools in the lower middle market typically trade at 2.5x–4.5x EBITDA. Purchase price should reference normalized EBITDA, with any add-backs for owner compensation, personal expenses run through the business, or one-time costs explicitly disclosed to avoid post-LOI disputes during quality of earnings review.

💡 Driving schools with school district contracts or municipal preferred vendor status command the higher end of the 3.5x–4.5x range. Schools with heavy owner dependency, aging vehicle fleets, or no online course offerings typically price at 2.5x–3.0x. Push back on any seller who blends personal vehicle expenses, family payroll, or non-recurring marketing costs into EBITDA without clear add-back documentation. Request three full fiscal years of tax returns and internally prepared financials before finalizing the LOI price.

Deal Structure and Payment Terms

Defines how the purchase price will be paid, including the equity injection, SBA loan amount, seller note, and any earnout component. Driving school acquisitions financed with SBA 7(a) loans require at least 10% buyer equity injection. Seller notes are common to bridge any gap between the appraised business value and SBA loan proceeds. Earnouts tied to student enrollment retention are frequently used when enrollment is seasonal or partially dependent on the outgoing owner's referral relationships.

💡 Sellers often resist earnouts because they feel they surrender control over the metric driving the payout. Tie earnouts to objective, measurable data — enrolled student counts pulled from scheduling software or DMV-submitted records — not gross revenue, which can be manipulated by pricing changes. For SBA deals, confirm with your lender early whether a seller note on standby is required during the SBA loan repayment period. Most SBA lenders require the seller note to be on full standby for 24 months post-closing.

Assets Included and Excluded

Explicitly lists what is and is not included in the transaction. For driving schools, this is critical because the vehicle fleet, curriculum materials, software licenses, school district contracts, DMV approvals, and trade name each carry distinct value and transferability considerations. Ambiguity in this section routinely causes deal disputes during purchase agreement drafting.

💡 Vehicle fleet valuation is a common point of contention. Buyers should commission an independent appraisal of dual-control training vehicles — these are specialty assets with limited resale markets. Deferred maintenance on the fleet should reduce purchase price dollar-for-dollar or require seller-funded repairs prior to closing. Online reviews cannot be legally transferred but practically follow the business if the Google Business Profile login credentials are conveyed — confirm this is addressed explicitly.

Regulatory and Licensing Contingencies

Establishes buyer's right to confirm that all state driver education licenses, DMV approvals, instructor certifications, and regulatory permits are current, in good standing, and transferable to the buyer entity prior to closing. This is among the most critical contingencies in any driving school LOI given that regulatory non-compliance can make a school inoperable and unlicensable.

💡 State licensing rules for driving schools vary dramatically. In some states, the license is issued to the individual owner and cannot be transferred — the buyer must apply for a new license, which can take 60–120 days. In others, a business entity license transfers with the business upon notification to the state. Research your specific state's rules before signing the LOI and build in adequate closing timeline buffers. Request copies of the most recent state inspection report and any DMV correspondence from the past three years as part of early due diligence.

Due Diligence Period and Access

Defines the length of the due diligence period, what information and access the buyer will receive, and the confidentiality obligations governing the process. Driving school due diligence should cover financial records, regulatory files, instructor employment records, vehicle maintenance logs, school district contracts, and technology platform documentation.

💡 45 days is the practical minimum for a regulated business like a driving school — request 60 days if you anticipate state licensing research will take time. Insist on seeing actual DMV course approval letters, not just the seller's verbal representation of compliance. Student enrollment data broken out by course type (teen driver ed, adult, defensive driving, fleet) is essential to understanding seasonality and identifying whether any single revenue stream represents a concentration risk.

Exclusivity and No-Shop Period

Grants the buyer an exclusive negotiation period during which the seller agrees not to solicit, negotiate, or accept offers from other potential acquirers. This protects the buyer's investment of time and legal fees during due diligence and purchase agreement drafting.

💡 60 days of exclusivity is standard for this deal size. If the seller pushes back on exclusivity length, offer a shorter initial period (30 days) with a mutual option to extend upon demonstration of good-faith progress. Exclusivity is a non-negotiable protection for buyers funding SBA loan applications and legal due diligence — if a seller refuses any exclusivity, treat it as a serious red flag about their intent to close.

Transition and Non-Compete Terms

Outlines the seller's post-closing obligations including a transition training period and a non-competition and non-solicitation covenant. For driving schools, the seller's personal relationships with school districts, referral sources, and long-term students represent significant goodwill — transition and non-compete terms protect the buyer's ability to retain this value.

💡 90 days of transition training is the minimum for a driving school where the owner has personally managed school district relationships and instructor scheduling. Push for 120–180 days if the owner is also the primary instructor or the sole holder of key referral relationships. Non-compete radius should reflect actual competitive market geography — in rural markets, 25 miles may be too small; in dense urban markets, it may be excessive. Tie the non-compete compensation (if any) to a separate consulting agreement to provide seller tax benefits and give the arrangement legal enforceability.

Conditions to Closing

Lists the specific conditions that must be satisfied before either party is obligated to proceed to closing. For driving school acquisitions, conditions should include SBA loan approval, satisfactory regulatory verification, instructor staff retention confirmation, and clean title transfer on the vehicle fleet.

💡 Instructor retention as a closing condition is industry-specific and critical — define the minimum number of certified instructors required (typically 3–5 depending on school size) and the form of retention confirmation (signed offer letters accepted, not merely verbal commitments). Material adverse change clauses should specifically reference enrollment levels and regulatory standing, not just generic financial performance, to capture driving school-specific risks.