Letter of Intent Template for Acquiring a Freight Forwarding Company

Parties and Transaction Overview

Identifies the buyer, seller, and target entity, specifies whether the transaction is structured as an asset purchase or stock purchase, and summarizes the general nature of the business being acquired, including licensed activities such as NVOCC operations or customs brokerage.

💡 Asset purchases are strongly preferred by buyers in freight forwarding because they avoid assumption of unknown customs compliance liabilities, unresolved FMC filings, or legacy carrier disputes. Sellers may push for a stock sale to achieve capital gains treatment — this is a significant negotiation point. If a stock sale is agreed, buyers should insist on expanded reps and warranties covering regulatory compliance history. Note that FMC licenses are entity-specific and may require re-application or assignment approval upon a change of control, so clarify this with the FMC prior to signing.

Purchase Price and Structure

Defines the total consideration, the allocation between cash at closing, seller note, and any earnout, and the basis on which valuation was derived — typically a multiple of trailing twelve-month net revenue or EBITDA, with explicit definitions to avoid later disputes.

💡 The distinction between gross revenue and net revenue is the most common source of valuation disputes in freight forwarding acquisitions. A forwarder with $5M in gross revenue may have only $1.5M in net revenue after paying carriers and agents — make sure the LOI specifies which figure anchors the multiple. Sellers should push for a higher cash-at-close percentage, while buyers using SBA financing will typically need the seller note structured to meet SBA standby debt requirements. Earnout structures are common given key-person risk but should be capped at 15–20% of total consideration to keep incentives aligned without creating excessive post-closing dependency.

Earnout Provisions

Defines the earnout calculation methodology, performance thresholds, measurement periods, and payment schedule, with specific reference to gross profit by customer and trade lane to account for revenue volatility common in freight forwarding.

💡 Sellers should insist that earnout calculations exclude any cost increases introduced by the buyer post-closing, such as new technology platforms or headcount additions, that were not part of the original cost structure. Buyers should ensure the earnout is tied to gross profit, not revenue, to account for margin shifts driven by trade lane mix or carrier rate changes. If the seller is staying on during the earnout period as an employee or consultant, tie a portion of their compensation to earnout achievement to maintain alignment. Include a buyer non-interference clause that prevents the buyer from redirecting key accounts in a way that would artificially suppress earnout performance.

Key-Person Transition and Non-Compete

Addresses the owner's post-closing role, the transition of shipper and carrier relationships, and the non-compete and non-solicitation restrictions that protect the buyer's investment in a relationship-driven business.

💡 The transition period and non-compete are the most critical protective provisions in any freight forwarding acquisition. Buyers should resist agreements where the seller transitions out in fewer than 12 months — shipper relationships in this industry are personal and transfer slowly. Sellers should negotiate compensation during the transition period and ensure the non-compete is narrowly scoped to specific trade lanes or verticals rather than a broad geographic restriction. Courts have scrutinized overly broad non-competes, so specificity is protective for both parties. If a key non-owner employee (e.g., a top operations manager or customs compliance officer) is critical to the business, consider requiring their employment agreements as a closing condition.

Due Diligence Contingencies

Specifies the scope and duration of the buyer's due diligence period and identifies freight forwarding-specific contingencies that must be satisfied before the buyer is obligated to proceed to a definitive agreement.

💡 Freight forwarding due diligence requires logistics-specific expertise — a generalist accountant or attorney will miss critical issues around revenue recognition, license compliance, and carrier liability exposure. Buyers should engage an advisor with freight forwarding M&A experience. The customer concentration threshold (item v above) is a common deal-stopper: if a single shipper exceeds 25–30% of net revenue and lacks a long-term contract, buyers should either re-price or require a larger earnout contingent on that account's retention. Sellers should pre-organize their due diligence data room before signing the LOI to avoid losing deal momentum during the 45–60 day window.

Exclusivity and No-Shop

Establishes a period during which the seller agrees not to solicit, entertain, or negotiate with other potential buyers, giving the buyer time to complete due diligence and finalize financing without competitive pressure.

💡 Sellers should push for a shorter exclusivity window (45 days) with a defined extension process rather than an open-ended period that keeps them off the market while the buyer delays. Buyers using SBA financing should be realistic about timeline — SBA approval can add 30–60 days beyond the exclusivity window, so build buffer into the overall closing schedule. If the seller has received other indications of interest, they should disclose this to the buyer prior to signing rather than after, as undisclosed competing offers discovered during exclusivity damage trust and can derail deals.

Confidentiality

Reaffirms confidentiality obligations with specific attention to the sensitivity of freight forwarding relationships, carrier rate agreements, and customer information in a tight-knit industry where information leakage can directly harm the business.

💡 Confidentiality is especially sensitive in freight forwarding because the community is small and interconnected — a seller's top shipper accounts may learn of a pending sale from a carrier representative or overseas agent before the seller is ready to disclose. Buyers should be prepared to sign a standalone NDA before receiving any financial information, and sellers should use code names for the business in any broadly distributed marketing materials. Employees, particularly operations managers and customer-facing staff, should not be informed of the sale until post-signing unless their cooperation in due diligence is required.

Closing Conditions

Identifies the conditions that must be satisfied before the transaction can close, including regulatory approvals, third-party consents, and representations and warranties, with freight forwarding-specific provisions around license transfers and carrier agreement assignments.

💡 The FMC licensing condition is unique to freight forwarding and is often underestimated by buyers. The FMC does not automatically transfer licenses upon a change of control — a new entity may need to apply for its own OTI license, which can take 60–90 days. Buyers should initiate the FMC application process immediately upon signing the LOI, not at closing. Sellers should ensure that all carrier agreements and overseas agent contracts contain assignment provisions or are willing to consent to assignment, as some interline agreements prohibit transfer without counterparty approval. The material adverse change clause should be defined to exclude general freight market downturns while capturing business-specific deterioration.