Letter of Intent Template for Acquiring a Montessori School

Parties and Transaction Overview

Identifies the buyer entity, seller entity, and the specific assets or equity interests being acquired. For Montessori schools, this section should clarify whether the transaction is structured as an asset purchase or equity purchase, and specifically name the school's operating licenses, curriculum IP, brand, and lease rights as part of the acquired assets.

💡 Asset purchase is strongly preferred by most Montessori school buyers to avoid assuming unknown liabilities and to obtain a stepped-up tax basis. Sellers may push for equity sale if personal goodwill is substantial or to achieve capital gains treatment — consult a tax advisor. Explicitly naming accreditation rights in the asset list signals to the seller that the buyer understands accreditation is a core value driver, and sets expectations early that lapsed or suspended accreditation will be a deal-breaker.

Purchase Price and Valuation Basis

States the proposed total purchase price, the basis for valuation (typically a multiple of adjusted EBITDA or seller's discretionary earnings), and the allocation between tangible assets, intangible assets, and goodwill. Montessori schools typically trade at 3x–5.5x adjusted EBITDA, with premium multiples paid for AMS/AMI accreditation, 85%+ re-enrollment rates, and professional administrative infrastructure.

💡 Sellers who draw above-market salaries or run personal expenses through the school will resist the normalized compensation adjustment. Document this clearly in the LOI to avoid disputes at closing. If enrollment is below 80% but trending upward, consider whether the offer price should reflect stabilized occupancy or current occupancy with an earnout bridging the gap. Avoid anchoring to a multiple the seller heard from a broker without verifying their EBITDA figure — recast financials yourself before finalizing the LOI price.

Deal Structure and Financing

Describes how the purchase price will be funded, including equity injection, SBA loan proceeds, seller financing, and any earnout component. Montessori school acquisitions are frequently SBA 7(a) eligible, with buyers contributing 10–20% equity and financing the balance. Seller notes of 10–20% tied to enrollment retention milestones are common in founder-operator transitions.

💡 SBA lenders will require the seller note to be on full standby for the first 24 months if it exceeds SBA thresholds — confirm this with your lender before finalizing LOI terms. Enrollment retention milestones for the seller note are a legitimate risk-sharing mechanism when the founder is the primary parent-relationship holder. Sellers will resist milestones they feel are outside their control post-close — frame it as mutual protection, and consider offering a shorter standby period or higher interest rate as a concession.

Earnout Provisions

Defines any variable compensation paid to the seller after close based on post-acquisition performance metrics. In Montessori school deals, earnouts are most commonly tied to enrollment occupancy, re-enrollment rates, or tuition revenue in the first 1–2 academic years following close. Earnouts protect buyers from paying full price for enrollment goodwill that may be tied to the departing founder.

💡 Montessori parents are highly attuned to ownership transitions — if the earnout period covers the first re-enrollment cycle (typically January–March for fall enrollment), it captures the most sensitive risk window. Avoid earnouts longer than 24 months, as they create ongoing disputes and complicate the seller's clean exit. If the seller insists on a higher base price rather than an earnout, consider bridging with a larger seller note tied to enrollment rather than a pure earnout to achieve a similar risk-sharing outcome with different accounting treatment.

Due Diligence Period and Access

Specifies the length of the due diligence period, the information and access the seller must provide, and the buyer's right to terminate if findings are materially adverse. Montessori school due diligence should cover financial records, licensing history, enrollment data, lease documents, staff credentials, and accreditation files.

💡 Request enrollment data by age cohort (toddler, primary, lower elementary) to identify attrition patterns that aggregate numbers hide. Licensing inspection history is public record in most states — pull it independently before or during due diligence. Give yourself at least 45 days; 60 is preferable given the complexity of childcare licensing review and lease assignability analysis. If the seller is reluctant to share staff compensation details before a signed LOI, offer a mutual NDA with specific confidentiality provisions around employee information.

Conditions to Closing

Lists the specific conditions that must be satisfied for the buyer to be obligated to close. For Montessori schools, conditions should include licensing transferability, accreditation continuity, lease assignment consent, and the seller meeting minimum enrollment thresholds at close.

💡 The landlord consent condition is frequently underestimated. Begin landlord outreach early — some landlords use lease assignment as an opportunity to renegotiate rent or shorten the remaining term. If the building is seller-owned, negotiate real estate terms separately but concurrently to avoid closing delays. The material adverse change clause should specifically call out the departure of key teaching staff — losing the lead Montessori guide before close can materially impair enrollment retention and should give the buyer a termination right.

Exclusivity and No-Shop

Prevents the seller from soliciting or entertaining other offers during the due diligence period. This protects the buyer's investment of time and money in due diligence and is standard in LOIs of this type.

💡 45–60 days of exclusivity is reasonable and standard. Sellers who resist exclusivity entirely are a red flag — they may be running a competitive process or have a prior relationship with another interested buyer. If the seller insists on a shorter exclusivity window (30 days), consider whether your due diligence scope can be compressed or request an automatic 15-day extension option if due diligence is materially incomplete.

Seller Transition and Non-Compete

Defines the seller's post-close obligations including a training and transition period, introduction to parents and staff, and restrictions on competing in the local market. This section is especially critical in Montessori school acquisitions where the founder often holds deep parent and community relationships.

💡 The transition period and consulting fee are often the most negotiated terms in a founder-operator Montessori deal. A 6-month minimum is essential if the founder is the primary parent-facing relationship; 12 months is preferable if re-enrollment season falls within the first year. Non-compete geography should reflect the realistic enrollment draw radius — in dense urban markets 5 miles may suffice; in suburban or rural markets 15 miles is appropriate. Sellers who insist on a short non-compete or limited transition period should trigger deeper diligence into whether key families or staff will follow them out.

Confidentiality

Requires both parties to maintain confidentiality regarding the transaction, the school's financial information, and the LOI terms. Confidentiality is especially sensitive in Montessori school deals because disclosure to parents or staff before close can trigger enrollment withdrawals or staff departures.

💡 This is one of the most operationally important provisions in a Montessori school LOI. A single parent learning of a pending ownership change and posting in the school's parent Facebook group can cascade into enrollment withdrawals. Agree on a communication plan and timeline before signing — typically announced to staff first, then parents, after the deal is fully closed or immediately before close with a joint transition message from both seller and buyer.

Non-Binding Nature and Binding Provisions

Clarifies which sections of the LOI are legally binding and which are expressions of intent only. Standard practice is for the LOI to be non-binding except for exclusivity, confidentiality, and cost allocation provisions.

💡 Make sure your attorney reviews the LOI before signature even though it is largely non-binding. Courts in some states have found LOI provisions to be binding where language was specific enough — particularly around exclusivity and confidentiality. If the seller pushes to make the purchase price or deal structure provisions binding in the LOI, resist; that rigidity will impair your ability to adjust price based on due diligence findings.