Letter of Intent Template for Acquiring a Foundation Repair Business

Parties and Transaction Overview

Identifies the buyer entity, seller entity, and the specific business assets or equity being acquired. For foundation repair businesses, it is critical to specify whether the transaction is structured as an asset purchase (most common for SBA deals) or a stock purchase, since warranty liabilities and contractor license transferability differ significantly between structures.

💡 Asset purchases are strongly preferred by SBA lenders and buyers because they allow a step-up in basis and limit exposure to pre-closing warranty claims and undisclosed liabilities. Sellers may push for a stock sale to minimize personal tax liability — if a stock structure is accepted, buyers must insist on a comprehensive warranty claim indemnification escrow. Confirm that the Company's contractor licenses are transferable or can be reissued to a buyer entity in the relevant states and counties before committing to structure.

Purchase Price and Valuation Basis

States the proposed purchase price, the EBITDA or SDE multiple applied, and the basis for the valuation. Foundation repair businesses typically trade at 3.5x–5.5x EBITDA depending on brand strength, crew depth, warranty claim history, and referral network transferability. The LOI should specify what financial period the valuation is based on and how working capital is treated.

💡 Sellers in this industry often add back significant owner compensation, personal vehicle expenses, and non-recurring equipment purchases to arrive at adjusted EBITDA. Buyers should scrutinize each addback carefully — in particular, confirm that owner-managed referral relationships and sales activity are reflected in a realistic replacement cost. If the seller is also the primary estimator or salesperson, a market-rate management replacement cost of $80,000–$120,000 annually should reduce stated EBITDA before applying a multiple.

Deal Structure and Financing

Describes the proposed funding mix including buyer equity, SBA 7(a) loan proceeds, seller note terms, and any earnout component. Foundation repair acquisitions are commonly SBA-eligible given their real estate optionality, equipment collateral, and consistent cash flow, but lenders will scrutinize warranty reserve adequacy before approving financing.

💡 SBA lenders will require a minimum 10% buyer equity injection and will evaluate the adequacy of the Company's warranty reserve as part of their underwriting. If the Company carries outstanding lifetime warranties with no documented reserve or historical claim data, the lender may require the seller to fund a warranty escrow at close — typically 2–5% of trailing revenue — held for 12–24 months. Sellers should prepare a warranty claim history report before the LOI stage to avoid this becoming a diligence surprise that reshapes deal economics.

Earnout Provisions

Defines whether any portion of the purchase price is contingent on post-close performance, and specifies the metric, measurement period, and payment schedule. Earnouts in foundation repair deals are most commonly tied to revenue retention, referral relationship continuity, or EBITDA thresholds in the first 12 months post-close.

💡 Earnouts are most justified when revenue is heavily dependent on the seller's personal referral relationships with realtors, home inspectors, or insurance adjusters. Buyers should resist tying earnouts to metrics the seller cannot reasonably influence post-close — EBITDA earnouts are often contentious because buyers control post-close expenses. Revenue retention earnouts are cleaner and more defensible. Include a provision that the earnout accelerates or is forfeited if Seller violates the non-compete or fails to fulfill their transition obligations.

Warranty Liability Allocation

Explicitly allocates responsibility for outstanding and future warranty claims arising from work performed prior to the closing date. This is the single most industry-specific provision in a foundation repair LOI and must not be left to the purchase agreement stage. The LOI should establish the framework for how pre-close warranty exposure will be quantified, reserved, and indemnified.

💡 This provision is non-negotiable from a buyer's perspective. Many foundation repair sellers underestimate their warranty exposure because claims are infrequent but expensive — a single helical pier failure or wall anchor failure can cost $15,000–$50,000 to remediate. Buyers should request warranty claim data for the prior 5 years, calculate an average annual claim cost, and size the escrow accordingly. Sellers who have maintained clean warranty records with low callback rates should embrace this provision as a credibility signal — it actually supports a higher valuation by demonstrating workmanship quality.

Due Diligence Period and Access

Specifies the length of the exclusivity and due diligence period, the categories of information to be provided by Seller, and the process for managing access to crew, customers, and referral partners during diligence. In foundation repair, diligence is more complex than most trades given warranty liability, licensing, and crew certification review requirements.

💡 60 days is appropriate for foundation repair deals given the complexity of warranty diligence and the need to verify licensing in every jurisdiction where the Company operates. Sellers should pre-organize their warranty claim history, crew certifications, and job costing data before the LOI is signed — buyers who encounter disorganized records during diligence lose confidence and either retrade or walk. The restriction on contacting referral partners is particularly important in this industry, where realtor and inspector relationships are relationship-sensitive and can be disrupted by premature disclosure of a sale.

Non-Compete and Non-Solicitation

Defines the geographic scope, duration, and prohibited activities of the seller's post-close non-compete agreement. In foundation repair, the non-compete must cover the Company's active service territory and address referral solicitation separately, since a seller who retains relationships with key realtors or inspectors could effectively divert future leads without directly competing.

💡 A 50-mile radius and 5-year term are market standard for owner-operated foundation repair businesses with strong local brand equity. Sellers may push for shorter durations or narrower geographies — be cautious of any compromise that leaves the seller free to rebuild referral relationships with realtors or home inspectors in the same market. The referral solicitation restriction is often more valuable than the direct competition restriction given how relationship-dependent this business model is.

Transition and Seller Cooperation

Defines the seller's post-close role, compensation, and obligations during the transition period. In foundation repair, where owner relationships with referral sources and crew trust in the owner are central to operations, a structured transition of 6–12 months is often essential to deal success.

💡 The length and structure of transition obligations should correspond to how owner-dependent the business is. If the seller is the sole estimator, primary sales contact, and crew manager, a 12-month paid consulting agreement is justified and protects the buyer's earnout exposure. If the Company has a strong operations manager or sales coordinator already in place, a 90-day unpaid transition may be sufficient. Tie the earnout payment explicitly to completion of transition milestones to give the seller a financial incentive to follow through.

Exclusivity and Expiration

Establishes the period during which the seller agrees not to market the business, solicit competing offers, or engage in substantive discussions with other buyers while the LOI is in effect.

💡 60 days of exclusivity is reasonable for a foundation repair deal with moderate complexity. Sellers should resist granting exclusivity beyond 75–90 days without a hard deposit or break fee, as extended exclusivity periods without closing certainty leave them exposed if the deal falls apart. Buyers should be aware that well-prepared foundation repair businesses with clean warranty records and strong financial documentation often attract multiple LOIs — acting quickly after initial diligence review is important to secure exclusivity before a competitor submits.