Letter of Intent Template for Acquiring an Engineering & Surveying Firm

Parties and Transaction Structure

Identifies the buyer entity, seller entity, and the legal structure of the proposed transaction — asset purchase or stock purchase. For engineering and surveying firms, asset purchases are more common because they allow buyers to exclude unknown liabilities such as unresolved E&O claims, but stock purchases may be preferred when client contracts and government authorizations are difficult to assign.

💡 Sellers should push for stock purchase if the firm holds government contracts or state DOT pre-qualification certifications that are not assignable under an asset deal without agency consent. Buyers should resist stock purchase unless they have thoroughly reviewed E&O history, open project claims, and all outstanding liabilities. In either case, identify early whether any key municipal or retainer contracts contain change-of-control provisions requiring client notification or consent.

Purchase Price and Valuation Basis

States the proposed total consideration, the EBITDA multiple or methodology used to derive it, and how owner compensation adjustments, discretionary add-backs, and backlog were factored into the valuation. Engineering and surveying firms in the lower middle market typically trade at 3.5x–6x adjusted EBITDA, with premium multiples reserved for firms with diversified client bases, multiple licensed staff, and strong contracted backlog.

💡 Sellers should provide a detailed backlog schedule broken down by client, contract type (fixed-fee vs. time-and-materials), and projected billing timeline before LOI execution to anchor valuation. Buyers should build a backlog haircut into the model — typically 10–20% — to account for scope changes, cancellations, and delayed project starts that are common in land development and infrastructure work. Avoid agreeing to a firm purchase price in the LOI without a clear mechanism for post-close true-up based on verified backlog at closing.

Deal Structure and Payment Terms

Outlines how the total consideration is allocated across cash at close, seller financing, SBA debt, and any earnout components. Most engineering and surveying firm acquisitions in the lower middle market use a combination of SBA 7(a) financing, a seller note, and a performance-based earnout tied to revenue retention or backlog conversion to manage key-man and client attrition risk.

💡 Sellers should negotiate earnout metrics that are within their direct control during the transition period — specifically revenue retention tied to their own client introductions rather than new business development by the buyer. Buyers using SBA financing should confirm with their lender that the seller note structure is compliant with SBA standby requirements, as SBA 7(a) rules typically require seller notes to be on full standby for the first 24 months. Earnout calculations should be agreed upon with clearly defined accounting methodology to avoid post-close disputes.

Professional Licensing Contingency

Addresses the critical condition that the transaction is contingent upon the buyer's ability to satisfy state professional licensing board requirements for firm ownership, including identification of a licensed PE or PLS who will serve as the responsible principal post-closing. This is among the most deal-specific contingencies in engineering and surveying acquisitions and must be addressed in the LOI, not deferred to the purchase agreement.

💡 This contingency protects buyers from closing into a firm they legally cannot operate. Sellers should validate their own state's rules before listing — some states require that a majority owner hold a professional license, while others permit non-licensed ownership with a designated licensed principal. In states with strict ownership requirements, buyers who are not licensed engineers or surveyors may need to structure a phased equity acquisition or retain the founding principal as a licensed officer during a multi-year transition. Engage a licensed attorney familiar with the applicable state engineering board rules before finalizing LOI language.

Transition and Seller Retention Period

Defines the post-closing role of the founding principal or key licensed staff, including the duration, compensation, and scope of the transition consulting or employment arrangement. In engineering and surveying firm acquisitions, a 2–3 year seller transition period is strongly preferred by buyers and lenders to protect client relationships and maintain licensed signatory capacity during the integration period.

💡 Sellers should negotiate transition compensation separately from the purchase price to avoid confusion about what is being paid for business value versus ongoing services. Buyers should include performance expectations in the transition agreement — not just availability — to ensure meaningful client handoff occurs. SBA lenders may require the seller's transition period to align with the earnout window, so coordinate with the lender early when structuring these parallel agreements.

Exclusivity and No-Shop Period

Establishes a defined period during which the seller agrees not to solicit, entertain, or negotiate with other prospective buyers while the buyer conducts due diligence and works toward a definitive agreement. Standard exclusivity periods in lower middle market professional services transactions run 45–90 days.

💡 Sellers should resist exclusivity periods longer than 60 days without a clear milestone schedule tied to buyer deliverables, such as completion of QoE review, financing commitment, and draft purchase agreement delivery. Buyers using SBA financing should be realistic about their timeline — SBA lender approval alone can take 30–45 days — and request a 90-day exclusivity period with automatic extension provisions. If the seller is working with a sell-side advisor, the advisor may push to limit exclusivity until after a management meeting or QoE kickoff is confirmed.

Due Diligence Scope and Access

Outlines the categories of information the buyer requires access to during the due diligence period and the seller's obligations to provide timely, accurate documentation. For engineering and surveying firms, due diligence must specifically address E&O insurance history, professional license status, backlog verification, contract assignability, and key employee compensation.

💡 Sellers should organize due diligence materials into a virtual data room before the LOI is signed to reduce friction and demonstrate transaction readiness. Particular attention should be paid to E&O insurance documentation — buyers and their lenders will scrutinize claims history closely, and any open claims or circumstances reported to the insurer must be disclosed proactively. Buyers should engage a Quality of Earnings (QoE) provider with professional services experience to independently verify EBITDA adjustments and backlog recoverability before committing to a firm purchase price.

Confidentiality and Non-Solicitation

Confirms that both parties are bound by confidentiality obligations and restricts the buyer from directly soliciting the seller's employees or clients during and after the due diligence period, regardless of whether the transaction closes.

💡 Sellers with highly specialized licensed staff — particularly PE or PLS signatories — should negotiate aggressive non-solicitation terms to protect against a failed deal that leaves their best employees vulnerable to recruitment by a buyer who walked away. Buyers should ensure that non-solicitation language carves out employees who independently approach the buyer after the deal falls through, to avoid overreach.

Binding vs. Non-Binding Provisions

Clearly distinguishes which provisions of the LOI create legally enforceable obligations and which are non-binding expressions of intent, subject to negotiation and execution of a definitive purchase agreement.

💡 Both parties should have independent legal counsel review the binding provisions before signing. Buyers should ensure that the break-fee or cost-bearing provisions are clearly non-binding unless they intend to commit to a specific remedy if they terminate the deal without cause after due diligence has begun. Sellers who have invested significantly in deal preparation — including QoE readiness and broker fees — may negotiate for a reverse break fee if the buyer terminates without a legitimate due diligence finding.