Letter of Intent Template for Acquiring an Electrical Contracting Business

1. Parties and Transaction Overview

Identifies the buyer entity (or entity to be formed), the seller, and the target business, including its legal name, state of incorporation, and primary operating location. This section also states the general nature of the proposed transaction — asset purchase or stock purchase — which has significant implications for license transferability and liability assumption in electrical contracting deals.

💡 Asset purchases are strongly preferred by buyers in electrical contracting because they allow the buyer to select which liabilities to assume and avoid inheriting unknown obligations such as open permit disputes, code violation fines, or prior insurance claims. Sellers often prefer stock sales for tax reasons — capital gains treatment on the full proceeds. Expect this to be a negotiation point. If the seller's master electrician license is held at the entity level in some states, an asset purchase may require a new license application, so verify state-specific contractor licensing rules before finalizing the transaction structure in the LOI.

2. Purchase Price and Valuation Basis

States the proposed total enterprise value, the valuation methodology used, and the assumed EBITDA or seller's discretionary earnings (SDE) baseline. For electrical contracting businesses, EBITDA multiples typically range from 3x to 5.5x depending on revenue mix, license structure, customer diversification, and fleet condition. This section should also reference any adjustments the buyer is making to normalize earnings.

💡 The single most important number in this section is the adjusted EBITDA. Electrical contracting sellers frequently run personal vehicle expenses, mobile phone bills, family member salaries, and owner health insurance through the business. Buyers must add these back to arrive at true earnings power. Conversely, buyers should apply a downward adjustment if a significant portion of revenue comes from one-time new construction projects rather than recurring service and maintenance agreements — that revenue carries more risk and warrants a lower multiple. Tie your purchase price explicitly to an EBITDA figure so that if due diligence reveals the real number is lower, the purchase price adjusts automatically.

3. Deal Structure and Payment Terms

Outlines how the purchase price will be funded, including any SBA loan proceeds, seller note, earnout provisions, or equity rollover. This section also addresses working capital requirements at closing and any holdback amounts tied to specific post-closing milestones such as technician retention or license transition.

💡 SBA 7(a) lenders for electrical contractor acquisitions will scrutinize the master electrician license situation closely — if the license belongs to the seller, the lender may require evidence of a licensed replacement before approving the loan. Build the earnout around technician retention specifically because the loss of a licensed master electrician or multiple journeymen immediately after closing is one of the most common value destruction events in this industry. The seller note amount and subordination terms must comply with SBA standby requirements, which typically prohibit full repayment of the seller note during the SBA loan term without lender approval.

4. Master Electrician License and Continuity Plan

Addresses the single most critical risk in any electrical contracting acquisition: who holds the master electrician license required to operate the business legally, and what the plan is to ensure uninterrupted licensing post-closing. This section should require the seller to disclose the license holder, the state licensing requirements for ownership transfer, and any steps needed to qualify a replacement.

💡 This provision is non-negotiable. Operating an electrical contracting business without a properly designated licensed master electrician can result in immediate suspension of the company's ability to pull permits, which effectively shuts down operations. Before signing the LOI, informally confirm whether the seller holds the license personally or whether an employee does. If the owner is the sole licensed master electrician and has no succession candidate, you either need to hire a replacement before closing or obtain your own license — both of which take time and money. Some buyers require a 90-day post-closing consulting period from the seller specifically to allow license transition to complete without operational disruption.

5. Due Diligence Period and Scope

Defines the length of the exclusive due diligence period, the categories of information the seller must provide, and the conditions under which the buyer may terminate the LOI without penalty. For electrical contractor acquisitions, due diligence must specifically cover licensing, fleet condition, open permits, customer contracts, and technician certifications.

💡 Forty-five days is the typical due diligence window for electrical contracting businesses in the $1M–$5M revenue range, but it can stretch to 60 days if the fleet is large, there are multiple locations, or the master electrician license situation requires regulatory coordination. Push for the full equipment and fleet inventory early — deferred maintenance on service vans and aging tools can represent hundreds of thousands of dollars in unbudgeted capital expenditure that should reduce your purchase price. Customer concentration analysis is equally critical: if a single commercial general contractor represents 25% or more of revenue, that relationship likely transfers with the seller, not the business.

6. Exclusivity and No-Shop Provision

Grants the buyer an exclusive negotiating window during which the seller agrees not to solicit, entertain, or enter into discussions with other potential acquirers. This is one of the few binding provisions in the LOI and protects the buyer's investment of time and legal costs during due diligence.

💡 Sellers who have been actively marketed by a business broker may resist a long exclusivity window. A 45-to-60-day no-shop period is standard and generally acceptable. If the seller pushes back significantly on exclusivity, it may indicate they are running a competitive process or have another interested buyer — both of which change your negotiating posture. Make the no-shop provision explicitly binding in the LOI, separate from the non-binding valuation and structure terms. Some buyers offer a small earnest money deposit ($10,000–$25,000) refundable upon closing in exchange for a firm exclusivity commitment from the seller.

7. Seller Transition and Non-Compete

Outlines the seller's expected post-closing role, the duration and scope of any consulting or employment arrangement, and the geographic and temporal boundaries of the non-compete agreement. In electrical contracting, the seller's relationships with commercial accounts and key referral sources make the non-compete scope particularly important.

💡 The non-compete radius and duration are frequently negotiated. For a business that operates in a single metropolitan market, a 30-to-50-mile radius for 3 years is standard and enforceable in most states. Be cautious about states with restrictive non-compete enforcement rules — California and Minnesota, for example, have significant limitations. The consulting period is especially valuable in electrical contracting because the seller often has personal relationships with GCs, property managers, or commercial accounts that need to be formally introduced to new ownership. Consider structuring a portion of the seller note paydown as contingent on completion of the full consulting period to align incentives.

8. Representations and Conditions to Closing

Lists the key representations the seller makes about the accuracy of financial statements and business information, and specifies the conditions that must be satisfied for the transaction to close. For electrical contractor deals, conditions should specifically address license status, insurance continuity, and the absence of material adverse changes to the workforce or customer base.

💡 Technician retention agreements as a closing condition are among the most valuable protections a buyer can negotiate in an electrical contracting acquisition. The business's capacity to generate revenue is entirely dependent on its licensed and certified field workforce. If three journeymen leave in the week after closing because they were loyal to the old owner and had no relationship with the buyer, revenue can drop immediately. Consider offering retention bonuses funded at closing — $5,000 to $15,000 per key technician paid 6 to 12 months post-close — to create an incentive for the workforce to stay through the transition period.