Letter of Intent Template for Acquiring a Fencing Company

Parties and Business Description

Identifies the buyer entity, seller, and the specific fencing business being acquired. For asset purchases — which represent the majority of fencing company transactions — this section should clearly name the operating entity, DBA trade name, and primary service territory so there is no ambiguity about what is being acquired.

💡 Sellers who operate under a well-recognized local trade name should confirm whether that name transfers with the asset purchase. If the DBA has brand equity — particularly with Google reviews and a long-standing commercial account book — buyers should explicitly list the trade name, domain, phone number, and online profiles as included assets. This prevents ambiguity later in the asset purchase agreement.

Proposed Transaction Structure

Defines whether the deal is structured as an asset purchase or stock purchase, which entity acquires the assets, and whether SBA financing is anticipated. Nearly all lower middle market fencing company acquisitions are structured as asset purchases to allow the buyer to step up the tax basis on equipment and avoid inheriting legacy liabilities such as warranty claims or subcontractor disputes.

💡 Sellers often prefer a stock sale for tax treatment reasons, particularly if the business is a C-Corp. Buyers using SBA financing are almost always required to structure an asset purchase. Clarify this early. If the seller pushes back on asset purchase structure, engage your CPA to model the after-tax proceeds difference and explore whether an adjusted purchase price or installment sale treatment can bridge the gap.

Purchase Price and Valuation Basis

States the proposed total enterprise value, the rationale based on a multiple of Seller's Discretionary Earnings (SDE) or EBITDA, and how the price was derived. For fencing companies, buyers typically apply a 2.5x–4.5x multiple on SDE, with the upper end reserved for businesses with documented commercial contracts, seasoned management, and owned equipment fleets in good condition.

💡 Fencing company valuations are highly sensitive to SDE add-backs. Sellers commonly add back owner vehicle expenses, personal cell phones, owner family payroll, and above-market owner compensation. Buyers should request a detailed add-back schedule before signing the LOI and reserve the right to adjust the purchase price if add-backs do not hold up under due diligence. A price adjustment mechanism tied to verified SDE protects buyers without blowing up the deal at signing.

Purchase Price Allocation and Payment Terms

Breaks down how the total purchase price will be paid across cash at close, a seller note, and any earnout component. For fencing businesses with significant commercial account revenue, buyers often tie a portion of the price to first-year contract retention to manage the risk of customer attrition following the ownership change.

💡 Sellers often resist earnouts because they create uncertainty about net proceeds. Frame the earnout as a shared-risk mechanism that allows you to pay a higher headline price than you could justify with cash alone — particularly when commercial accounts represent more than 30% of revenue. Tie earnout metrics to objective, verifiable measures like gross billings to named accounts rather than subjective measures like 'customer satisfaction.' Keep earnout periods short — 12 months is standard for fencing businesses.

Assets Included and Excluded

Explicitly lists the categories of assets transferring to the buyer and any assets the seller intends to retain. For fencing companies, the equipment schedule — including trucks, trailers, post drivers, augers, and inventory of fence panels and hardware — is one of the most financially significant components of the deal and must be defined clearly.

💡 Fencing company equipment schedules require careful attention. Request a full fleet list with vehicle identification numbers, year, make, model, mileage, and most recent service records before signing the LOI. Deferred maintenance on trucks and trailers is one of the most common post-close surprises in fencing acquisitions. Consider building a fleet condition contingency into the LOI — for example, the right to reduce the purchase price if the independent equipment appraisal reveals aggregate deferred maintenance exceeding a threshold such as $25,000.

Due Diligence Period and Access

Establishes the length of the due diligence period, the categories of information the buyer will review, and the seller's obligation to provide access to records, personnel, and facilities. For fencing companies, due diligence must cover financial records, equipment condition, employee and subcontractor agreements, licensing, and customer concentration.

💡 Sellers who have run lean administrative operations — common in fencing businesses — may not have clean job costing records or organized subcontractor files. Build in a cure period of 10–15 days for the seller to compile missing materials before the clock on your due diligence window starts running. For SBA-financed deals, your lender will also require an independent business appraisal and equipment appraisal, which typically add 2–3 weeks to the timeline and should be accounted for in your due diligence period length.

Exclusivity and No-Shop Period

Prevents the seller from marketing the business to or negotiating with other buyers during the due diligence period. This is a critical protection for buyers who are investing significant time and money in lender engagement, independent appraisals, and attorney fees to advance the transaction.

💡 Sellers working with a business broker may have received multiple indications of interest before selecting your LOI. Make sure exclusivity language is mutual — meaning the seller's broker also cannot continue shopping the deal. Forty-five to sixty days is standard for a lower middle market fencing acquisition. If SBA lender processing delays are anticipated, negotiate an option to extend exclusivity by 15–30 days with written notice, which gives you runway without renegotiating the full LOI.

Key Employee and Owner Transition

Addresses the seller's role during and after closing, including any employment or consulting agreement, and protects the buyer's interest in retaining key field personnel such as lead estimators, foremen, and commercial account managers whose relationships drive revenue continuity.

💡 Owner dependency is the single most cited risk factor for fencing company acquisitions. Buyers should push for a transition period of at least 90 days for businesses where the owner handles estimating and commercial account relationships directly. Sellers who are ready to exit quickly may resist long transition commitments — consider a graduated consulting fee structure that compensates the seller for a meaningful transition without requiring full-time engagement beyond the first 60 days.

Non-Compete and Non-Solicitation

Restricts the seller from competing in the same geographic market or soliciting customers and employees following the close of the transaction. For fencing businesses where the seller's personal reputation and relationships are core to the brand, a meaningful non-compete is essential to protect the goodwill being acquired.

💡 SBA lenders typically require non-compete agreements as a condition of loan approval. A 3-to-5-year term and 50-mile radius is standard and defensible for a fencing company with an established local market presence. If the seller plans to retire completely, they will generally accept these terms without significant pushback. If the seller has a spouse or family member who may continue in the trades, ensure the non-compete covers related parties or affiliated entities to prevent circumvention.

Conditions to Closing

Lists the material conditions that must be satisfied before either party is obligated to proceed to closing. For fencing company acquisitions, these conditions typically include SBA loan approval, satisfactory completion of due diligence, equipment appraisal within an acceptable range, transfer of contractor licenses, and confirmation of key employee retention.

💡 Sellers may push to limit the due diligence condition to 'material' findings only, preventing buyers from using minor issues to exit the deal. This is a reasonable ask — consider agreeing that due diligence termination rights apply only to findings that represent a reduction in verified SDE exceeding 10% or reveal undisclosed liabilities exceeding $[X,XXX]. This gives both parties clarity and protects sellers from buyers who use the due diligence condition as a free option to renegotiate price after exclusivity has been granted.

Confidentiality

Confirms that both parties will maintain the confidentiality of deal terms, financial information shared during due diligence, and the existence of the transaction. Confidentiality is especially critical for fencing businesses where employee and customer awareness of a pending sale can trigger attrition before close.

💡 In fencing businesses, crew members and key estimators are often closely connected to the owner personally. Word of a sale spreading through the field before close can cause key employees to begin exploring other opportunities, which is the exact key-man risk buyers are paying a premium to avoid. Agree on a joint communication plan for announcing the transition to employees and customers — ideally prepared before close and executed on closing day with the seller present to provide reassurance.

Binding and Non-Binding Provisions

Clarifies which sections of the LOI are legally binding on both parties and which sections are expressions of intent subject to execution of a definitive agreement. Standard practice is for confidentiality, exclusivity, and governing law to be binding while purchase price, structure, and other deal terms remain non-binding pending due diligence.

💡 Some sellers — particularly those advised by experienced brokers — will ask buyers to increase the binding nature of the LOI by including a breakup fee or good-faith deposit that is forfeited if the buyer walks away without cause. For deals over $1.5M in purchase price, a refundable good-faith deposit of $25,000–$50,000 held in escrow is sometimes appropriate and signals serious buyer intent. Make sure any deposit is refundable if the deal fails due to SBA financing denial or material due diligence findings.