A restoration-specific LOI guide covering TPA relationship transfer, insurance receivables treatment, IICRC certification continuity, and earnout structures — written for buyers and sellers in the $1M–$5M revenue range.
Acquiring a fire and water damage restoration company requires an LOI that goes well beyond standard business purchase language. Unlike most service businesses, restoration operators derive value from assets that rarely appear on a balance sheet: preferred vendor status with insurance carriers, TPA program memberships, adjuster relationships, and IICRC-certified technician teams. A generic LOI risks leaving these critical deal points undefined, creating disputes at closing or post-acquisition revenue deterioration. This guide walks buyers and sellers through every material section of a restoration-specific Letter of Intent, from purchase price and working capital to earnout triggers tied to TPA retention and technician continuity. Whether you are an independent buyer using SBA 7(a) financing, a private equity-backed platform operator, or an owner-operator preparing for a first-time exit, this template is designed to protect your interests at the term-sheet stage before expensive legal diligence begins.
Find Fire & Water Damage Restoration Businesses to AcquireBuyer and Seller Identification
Identifies the legal entities or individuals entering into the transaction. For restoration acquisitions, it is important to clarify whether the buyer is acquiring the operating entity, a newly formed acquisition vehicle, or a subsidiary of a platform operator. Also confirm whether the seller is an individual owner-operator or a family-owned LLC, as this affects how insurance carrier credentialing and TPA agreements will need to be transferred or novated post-close.
Example Language
This non-binding Letter of Intent is entered into as of [Date] by and between [Buyer Entity Name], a [State] [LLC/Corporation] ('Buyer'), and [Seller Name], an individual, and [Target Company Name], a [State] LLC ('Company'). Buyer intends to acquire substantially all of the assets of the Company, including its trade name, equipment, vehicles, customer relationships, and associated TPA and preferred vendor agreements, subject to the terms set forth herein.
💡 Sellers should confirm whether their TPA agreements with carriers such as State Farm or Farmers are assignable to the buyer's entity or require reapplication. Buyers should specify whether they are acquiring assets or equity, as asset deals allow selective assumption of liabilities but may require re-credentialing with insurance carriers, creating post-close revenue risk.
Purchase Price and Valuation Basis
States the proposed total purchase price and describes how it was derived. In restoration acquisitions, valuation is typically based on a multiple of adjusted EBITDA, with the market range for qualified businesses falling between 3.5x and 5.5x. The LOI should specify whether the multiple is applied to trailing twelve months, seller's discretionary earnings, or a normalized three-year average, and must acknowledge any EBITDA adjustments for owner compensation, personal vehicle use, or one-time catastrophe-driven revenue spikes.
Example Language
Buyer proposes a total purchase price of $[X,XXX,000] ('Purchase Price'), representing approximately [4.0x–4.5x] the Company's trailing twelve-month adjusted EBITDA of $[XXX,000], as normalized for owner's above-market compensation of $[XX,000], personal vehicle expenses of $[XX,000], and non-recurring large-loss jobs exceeding $[XX,000] in the prior fiscal year. Final Purchase Price is subject to confirmation through financial due diligence and a Quality of Earnings review.
💡 Sellers of restoration companies with inconsistent year-over-year revenue due to weather-driven catastrophe work should push for a three-year average EBITDA basis rather than trailing twelve months, particularly if the most recent year was below average. Buyers should insist on a Quality of Earnings analysis from a restoration-experienced advisor to normalize insurance write-offs, disputed supplement billing, and subcontractor pass-through costs that can distort gross margin.
Deal Structure and Payment Terms
Outlines how the purchase price will be funded, including equity, SBA financing, seller note, and any earnout component. Restoration acquisitions under $3M commonly use SBA 7(a) loans covering 80–90% of the purchase price. Deals with TPA relationship risk often include a seller note or earnout tied to revenue retention from preferred vendor accounts over 12–24 months post-close.
Example Language
The Purchase Price shall be funded as follows: (i) $[X,XXX,000] via SBA 7(a) loan financing arranged by Buyer, representing approximately [85]% of the Purchase Price; (ii) a Seller Note of $[XXX,000] bearing interest at [6]% per annum with a [24]-month term, subordinated to SBA lender requirements; and (iii) an Earnout of up to $[XXX,000] payable over [24] months post-close, contingent upon the Company maintaining at least [80]% of trailing twelve-month revenue from active TPA program accounts as of the Closing Date.
💡 Buyers should tie any seller note repayment acceleration to TPA program continuity and IICRC certification retention, providing leverage if key assets deteriorate post-close. Sellers should negotiate earnout measurement periods that exclude catastrophe-year revenue spikes from the baseline, ensuring they are not penalized for a regression to mean revenue in a normalized year. Both parties should specify which TPA accounts are included in earnout baseline calculations before signing the LOI.
Working Capital Target and Receivables Treatment
Defines the expected net working capital at closing and addresses the treatment of outstanding insurance receivables, which are a unique and often contentious element in restoration transactions. Insurance receivables in restoration businesses typically age 60–120 days and may include disputed supplement amounts, partial payments from adjusters, and invoices pending TPA review.
Example Language
The parties agree to negotiate in good faith a normalized working capital target ('NWC Target') to be determined during due diligence, based on a trailing twelve-month average of net working capital excluding cash and seller-retained pre-closing receivables. Accounts receivable existing as of the Closing Date shall be retained by Seller, with Buyer acquiring only receivables arising from jobs completed within [45] days prior to close. Seller shall provide a full AR aging schedule at LOI execution, including notation of any balances subject to supplement disputes, TPA adjustments, or carrier-level write-offs.
💡 This is one of the most negotiated elements in restoration deals. Buyers should insist on reviewing AR aging before finalizing the LOI because large balances over 90 days or disputed supplements can indicate systemic billing problems that affect true EBITDA. Sellers should avoid agreeing to take back all pre-close receivables without a clear collection timeline, as slow insurance reimbursement cycles can leave them chasing payments for 6–12 months post-close.
Assets Included in the Transaction
Specifies which assets transfer to the buyer at closing, including equipment, vehicles, certifications, trade name, phone numbers, domain, software systems, TPA memberships, and customer relationship data. In restoration acquisitions, the inclusion of equipment inventory condition, vehicle fleet status, and software platforms such as Xactimate licensing or job management systems like Dash or Encircle should be explicitly listed.
Example Language
The transaction shall include the transfer of all tangible and intangible assets of the Company necessary for ongoing operations, including but not limited to: (i) all mitigation and restoration equipment including air movers, dehumidifiers, and thermal imaging devices, as listed on the attached Equipment Schedule; (ii) [X] vehicles as listed on the attached Fleet Schedule, subject to Buyer's inspection and lien confirmation; (iii) the Company's trade name, phone numbers, website, and all digital marketing accounts; (iv) all active TPA program memberships and preferred vendor agreements, to the extent assignable; (v) Xactimate license and job management software accounts; and (vi) all IICRC certification documentation for currently employed technicians.
💡 Buyers must conduct a physical equipment inspection before closing to identify deferred maintenance or end-of-life assets. Sellers should disclose any equipment under lease or lien, as undisclosed encumbrances discovered post-LOI can kill deals or result in purchase price reductions. Both parties should confirm with each TPA program administrator whether membership transfers automatically or requires a new application under the buyer's entity.
Transition and Seller Involvement
Defines the seller's role post-close, including any consulting, training, or relationship transition period. In restoration businesses, owner relationships with insurance adjusters, independent agents, and TPA representatives are often central to ongoing revenue. A structured transition period of 6–24 months is common and directly affects the value and risk profile of the acquisition.
Example Language
Seller agrees to remain available for a transition period of [12] months following the Closing Date, providing services as an independent consultant at a rate of $[X,000] per month. During this period, Seller shall introduce Buyer's designated operations manager to all active insurance adjuster contacts, TPA program representatives, and preferred vendor coordinators. Seller further agrees to make reasonable efforts to facilitate assignment or novation of all carrier relationships within [90] days of closing.
💡 Buyers should require the seller to introduce key adjuster and carrier relationships to a specific named operations manager or project lead, not just the buyer entity generically, to ensure relationships actually transfer. Sellers should set clear boundaries on consulting availability and liability during the transition period and negotiate for compensation that reflects the strategic value of their relationship network, not just their time.
Exclusivity and No-Shop Period
Grants the buyer an exclusive negotiating period during which the seller agrees not to solicit or entertain competing offers. In restoration acquisitions, exclusivity periods of 45–75 days are standard, reflecting the complexity of diligence required around TPA agreements, AR aging, and equipment audits.
Example Language
Upon execution of this LOI, Seller agrees to grant Buyer an exclusive negotiating period of [60] days ('Exclusivity Period'), during which Seller shall not solicit, entertain, or facilitate discussions with any other potential acquirer regarding the sale of the Company or its assets. Buyer agrees to execute this LOI in good faith and to commence due diligence within [10] business days of execution, including engagement of a QoE provider and legal counsel.
💡 Sellers should tie exclusivity to concrete buyer milestones such as delivery of a due diligence document request list within 10 days and QoE engagement within 15 days, preventing a buyer from locking up the business without actively pursuing diligence. Buyers should request a 15-day extension option in exchange for a refundable good faith deposit of $25,000–$50,000, which is common in lower middle market restoration deals.
Conditions to Closing
Lists the material conditions that must be satisfied before the transaction can close. Restoration-specific conditions include confirmation of TPA program transferability, satisfactory results from equipment and fleet inspection, IICRC certification status verification, and SBA lender approval. Any condition tied to key employee retention should also be listed here.
Example Language
Closing of the transaction is conditioned upon: (i) Buyer's satisfactory completion of financial, operational, and legal due diligence; (ii) SBA lender approval and issuance of a commitment letter; (iii) written confirmation from at least [two] major TPA program administrators that existing preferred vendor status will be transferred to or reapplied by Buyer's entity without material lapse in referral eligibility; (iv) confirmation that all IICRC certifications held by Company technicians are current and in good standing; (v) execution of employment or retention agreements with [key project manager names or roles]; and (vi) no material adverse change in the Company's operations, revenue run rate, or key personnel between LOI execution and Closing.
💡 Buyers should not waive the TPA transferability condition, as loss of preferred vendor status with a major carrier post-close can reduce revenue by 20–40% in markets where TPA-directed work represents the majority of job volume. Sellers should negotiate a mutual MAC clause that also protects them if buyer financing falls through due to lender-specific issues unrelated to business performance, allowing them to re-engage the market without penalty.
Confidentiality and Non-Disclosure
Affirms that both parties will maintain confidentiality of deal terms, financial information, and business data shared during the LOI and diligence process. In restoration businesses, confidentiality is especially critical because technician teams, insurance adjuster contacts, and TPA representatives can be destabilized if news of a potential sale reaches the field prematurely.
Example Language
Both parties agree to maintain strict confidentiality of this LOI, all financial disclosures, TPA program documentation, employee information, and carrier contact data shared during the due diligence process. Neither party shall disclose the existence or terms of this transaction to any employee, subcontractor, insurance carrier representative, or third party without the prior written consent of the other party, except as required by law or lender disclosure obligations.
💡 Sellers should ensure that any SBA lender disclosure by the buyer is covered by the lender's own confidentiality obligations and that the buyer does not contact adjuster relationships, TPA coordinators, or key employees without prior seller consent. Buyers should request that confidentiality carve-outs allow disclosure to legal counsel, accountants, and SBA lender representatives who are themselves bound by confidentiality.
Non-Compete and Non-Solicitation
Specifies the geographic and temporal restrictions on the seller's ability to compete or solicit employees, customers, and insurance relationships post-close. Non-competes in restoration acquisitions typically cover a 3–5 year period and a geographic radius of 50–150 miles depending on the company's service territory, reflecting the localized and relationship-driven nature of insurance referral networks.
Example Language
As a condition of closing, Seller agrees to execute a non-compete agreement prohibiting Seller from directly or indirectly engaging in fire, water, or mold damage restoration services within a [75]-mile radius of the Company's primary operating address for a period of [4] years following the Closing Date. Seller further agrees not to solicit any current employee, insurance adjuster contact, TPA representative, or commercial account of the Company for a period of [4] years post-close.
💡 Buyers should ensure the non-compete explicitly covers independent consulting to competing restoration operators and franchise territory development, not just direct ownership. Sellers who plan to remain active in a transition consulting role should negotiate a carve-out that allows them to perform agreed-upon consulting services for the buyer entity without triggering the non-compete.
TPA Agreement Transferability
Preferred vendor and TPA program memberships with carriers such as State Farm, Allstate, and Farmers are often the most valuable and most fragile assets in a restoration acquisition. Buyers must confirm before signing the LOI whether these agreements are assignable, require new applications under the buyer's entity, or may be revoked at the carrier's discretion during an ownership transition. Sellers should disclose any pending audits, performance reviews, or compliance issues with TPA programs that could affect transferability.
Insurance Receivables Aging and Allocation
Outstanding insurance receivables at the time of close can represent 60–90 days of revenue in a restoration business. The LOI must clearly define which receivables transfer to the buyer, which are retained by the seller, and how disputed supplement balances will be resolved. Buyers should request a full AR aging schedule at LOI execution and flag any balances over 90 days or accounts with unresolved adjuster disputes as potential purchase price adjustments.
IICRC Certification Continuity
IICRC certifications held by technicians are individual credentials, not company assets, and cannot be transferred to a buyer entity. The LOI should confirm which employees hold current certifications, identify any certifications that are expiring within 12 months of close, and include a condition requiring continued employment of a minimum number of certified technicians through closing. Buyers should also confirm whether the company maintains Water Restoration Technician, Applied Structural Drying, and Fire and Smoke Restoration credentials across the team.
Earnout Baseline and Measurement Period
Earnouts tied to revenue retention from TPA accounts or specific insurance carrier referral volume must be carefully defined in the LOI to avoid post-close disputes. The baseline period, measurement metrics, excluded revenue categories such as catastrophe spikes, and payment timing must all be specified. Sellers should push for earnout calculations that exclude extraordinary weather events from the baseline and buyers should require monthly reporting with access to job-level revenue data during the earnout period.
Key Employee Retention Agreements
In restoration businesses where the owner is transitioning out, the retention of project managers and senior technicians is often more critical to ongoing revenue than any other single factor. The LOI should identify specific key employees whose continued employment is a condition of closing and should outline the structure of any retention bonuses or employment agreements to be executed at close. Sellers should disclose any known employee dissatisfaction or competing job offers before exclusivity is granted.
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Most sections of a restoration LOI are explicitly non-binding, meaning they represent good-faith agreed-upon terms rather than enforceable obligations. However, certain provisions — including confidentiality, exclusivity, and non-solicitation of employees — are typically written as binding. Buyers and sellers should always have an attorney review the LOI before signing to confirm which sections carry legal weight, particularly in restoration deals where TPA agreement terms and AR allocation can be disputed if not clearly documented at the LOI stage.
Insurance receivables should be addressed explicitly in the LOI, not left to the purchase agreement stage. Standard practice is for the seller to retain all receivables existing at close, with the buyer acquiring only receivables from jobs completed within a defined window — typically 30 to 60 days prior to closing. The LOI should require the seller to provide a full AR aging schedule at execution, with notation of any balances subject to supplement disputes, TPA adjustments, or aging over 90 days. These items may become purchase price adjustment triggers if material discrepancies are discovered during diligence.
Earnouts in restoration acquisitions are most commonly tied to retention of TPA-directed revenue or specific carrier referral volume over a 12 to 36 month period post-close. A typical structure provides the seller with up to 10 to 20 percent of the purchase price in additional consideration, paid in quarterly or annual installments, contingent on the acquired business maintaining 75 to 90 percent of baseline TPA revenue. Buyers use earnouts to manage the risk that key insurance relationships erode after the owner departs, while sellers use them to capture upside if the business performs at or above historical levels under new ownership.
TPA programs — where insurance carriers such as State Farm, Allstate, or Farmers direct work to preferred vendors — can represent 40 to 70 percent of total revenue for many independent restoration operators. Because TPA membership is typically held by the legal entity or individual operator, buyers must confirm during the LOI stage whether existing agreements are assignable to a new entity, require reapplication, or may lapse during an ownership transition. If TPA transferability cannot be confirmed before exclusivity is granted, buyers should either extend the due diligence timeline or reduce the purchase price to account for the risk of referral disruption during re-credentialing.
Yes, fire and water damage restoration businesses are among the most SBA-eligible service businesses in the lower middle market. Most lenders familiar with the restoration industry will finance 80 to 90 percent of the purchase price through an SBA 7(a) loan, with the remainder covered by a seller note and buyer equity injection. The LOI should include SBA lender approval as a closing condition and should specify whether the seller note is structured to comply with SBA standby requirements. Buyers should engage an SBA lender with experience in service business acquisitions early in the LOI process, as lender approval timelines of 45 to 90 days can constrain exclusivity periods.
Sellers should evaluate four key elements before executing an LOI: first, whether the buyer has documented evidence of SBA pre-qualification or equity financing ability sufficient to close the deal; second, whether the purchase price and EBITDA normalization methodology are clearly defined and reasonable given the company's actual cash flow; third, whether the earnout structure, if included, uses fair and verifiable metrics tied to revenue categories within the seller's control during transition; and fourth, whether the exclusivity period is tied to specific buyer milestones that prevent the business from being locked up without active diligence. Sellers should also confirm that the LOI's confidentiality provisions are strong enough to protect adjuster relationships and employee stability during the diligence period.
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