A dealership acquisition is not a standard business purchase. Use this industry-specific LOI to address OEM franchise transfers, seasonal inventory valuation, floor plan financing, and technician retention before you enter due diligence.
Acquiring an outdoor and power equipment dealership requires an LOI that goes well beyond boilerplate language. Unlike a typical service business, a dealership acquisition involves OEM manufacturer approval for dealer agreement transfers, complex inventory that fluctuates by season and aging status, floor plan credit facilities that may need to be assumed or replaced, and a service department whose value depends heavily on certified technician retention. A well-drafted LOI sets the stage for a clean transaction by establishing how inventory will be valued at closing, how the OEM transfer process will be handled, and what conditions must be met before the deal can proceed. This guide walks buyers and sellers through each section of a tailored LOI, highlights the terms most likely to be disputed, and flags the mistakes that derail dealership deals before they close.
Find Outdoor & Power Equipment Dealer Businesses to AcquirePurchase Price and Consideration Structure
Defines the total purchase price, how it is allocated between tangible assets (inventory, equipment, real property or leasehold) and intangible assets (goodwill, customer relationships, OEM dealer agreements), and the form of consideration including cash at closing, seller note, and any earnout.
Example Language
Buyer proposes to acquire substantially all assets of [Business Name] ('the Dealership') for a total purchase price of $[X], structured as follows: (i) $[X] cash at closing funded in part through an SBA 7(a) loan; (ii) a seller note of $[X] representing approximately 10–15% of the purchase price, subordinated to the SBA lender, bearing interest at [X]% per annum with a [5-year] term; and (iii) an earnout of up to $[X] tied to OEM dealer agreement transfer milestones and revenue retention, payable over 24 months post-closing. The purchase price assumes inventory valued at cost per the methodology described herein. Any variance in inventory value at closing shall result in a dollar-for-dollar adjustment to the cash consideration.
💡 Sellers often anchor on a high goodwill multiple without accounting for the fact that buyers will require an inventory adjustment mechanism. Agree in the LOI on whether inventory is valued at dealer cost, FIFO, or a discounted value for aged stock (typically units older than 24 months or parts with no sales velocity in 12+ months). Earnouts tied to OEM transfer milestones are reasonable but should have a cap and clear trigger events so neither party is left in limbo if the manufacturer delays approval.
Inventory Valuation Methodology
Specifies how new equipment, used equipment, and parts inventory will be valued at closing, including treatment of aged, obsolete, consigned, and floor-planned inventory. This section prevents the single most common source of post-LOI disputes in dealership transactions.
Example Language
Inventory shall be valued as of the closing date using a joint physical count conducted no earlier than five (5) business days prior to closing. New equipment on floor plan shall be valued at dealer invoice cost net of any manufacturer holdbacks or incentives owed to the Dealership. Used equipment shall be valued at the lower of cost or current market value as determined by [agreed third-party guide or methodology]. Parts inventory shall be valued at dealer cost, subject to a write-down of [X]% for any part with no recorded sales activity in the trailing 12 months and a full write-off for any part discontinued by the applicable OEM. Consigned inventory shall be excluded from the purchase price. The parties agree to engage [inventory auditor or agreed CPA] to conduct the valuation.
💡 Sellers frequently overvalue used equipment and aging parts on their books. Buyers should insist on this section being specific rather than deferred to due diligence. A common compromise is agreeing to a maximum write-down cap on parts (e.g., no more than 15% of total parts book value) to give the seller predictability, while reserving the right to exclude truly dead stock. Floor-planned inventory is a particular risk — confirm that the floor plan lender will release liens at closing and that the payoff amount is accounted for in the sources and uses.
OEM Dealer Agreement Transfer Conditions
Addresses how and when OEM manufacturer approvals for dealer agreement assignments will be obtained, which party bears the cost and risk of that process, and what happens to the deal if approval is denied or delayed.
Example Language
This LOI and the definitive purchase agreement are conditioned upon Buyer receiving written approval or non-objection from all OEM manufacturers whose authorized dealer agreements are currently held by the Dealership, including but not limited to [Husqvarna, STIHL, Kubota, ECHO, or applicable brands], for the assignment or reissuance of such agreements to Buyer or Buyer's designated entity on terms no less favorable than those currently in effect. Seller shall promptly notify all applicable OEMs of the proposed transaction and cooperate fully with the manufacturer approval process. In the event any OEM denies transfer or exercises a right of first refusal, the parties shall negotiate in good faith regarding a purchase price adjustment or deal termination. The due diligence period shall not be deemed complete until all material OEM approvals have been received or waived in writing by Buyer.
💡 This is the most deal-critical condition in any dealership acquisition. Some OEMs, particularly STIHL and certain Kubota agreements, are not assignable and require the manufacturer to issue a new agreement directly to the buyer, which can take 30–90 days and requires the buyer to meet capitalization, facility, and training requirements. Sellers should begin OEM notification conversations before going to market. Buyers should not release earnest money or commit significant due diligence costs until at least preliminary OEM acknowledgment is received. Never assume transferability — confirm it in writing with the manufacturer.
Due Diligence Period and Access
Defines the length of the due diligence period, what information and access the buyer is entitled to, and how confidentiality will be maintained during the process.
Example Language
Buyer shall have [45–60] days following execution of this LOI to complete financial, operational, legal, and inventory due diligence (the 'Due Diligence Period'). Seller shall provide Buyer and Buyer's advisors with full access to three (3) years of financial statements, federal and state tax returns, OEM dealer agreements and correspondence, floor plan credit agreements, employee records including technician certifications, lease agreements, customer account records, and all other information reasonably requested by Buyer. Buyer agrees to treat all information received as strictly confidential and to use it solely for the purpose of evaluating the proposed transaction. The Due Diligence Period may be extended by mutual written agreement of the parties.
💡 45 days is generally the minimum for a dealership acquisition given the complexity of OEM approvals and inventory audits. Request 60 days if the deal involves multiple OEM brands or real estate. Sellers should resist providing full employee compensation details until the LOI is executed and a deposit is in place. Buyers should prioritize reviewing OEM agreements, floor plan terms, and the trailing 12-month P&L broken out by revenue category (new equipment, used equipment, parts, service labor) in the first two weeks.
Earnest Money Deposit
Specifies the amount, timing, and conditions under which the earnest money deposit is paid, held, and either applied to closing or refunded to the buyer.
Example Language
Within five (5) business days of execution of this LOI, Buyer shall deposit $[X] (the 'Deposit') in escrow with [escrow agent or attorney]. The Deposit shall be applied to the purchase price at closing. In the event Buyer terminates this LOI during the Due Diligence Period for any reason disclosed in due diligence, the Deposit shall be refunded to Buyer in full. In the event Buyer terminates this LOI after the expiration of the Due Diligence Period without cause, the Deposit shall be forfeited to Seller as liquidated damages. In the event the transaction fails to close due to failure to obtain OEM manufacturer approval despite good-faith efforts by both parties, the Deposit shall be refunded to Buyer.
💡 For dealership transactions in the $1M–$3M range, deposits of $25,000–$75,000 are typical. Sellers should require a meaningful deposit given the time and cost of OEM approval processes. The OEM carve-out for deposit refund is essential for buyers and reasonable for sellers — neither party controls manufacturer decisions. Tie the refund trigger specifically to documented denial by the OEM in writing rather than a vague 'failure to obtain approval' standard.
Employee and Technician Retention
Addresses how existing employees, particularly certified service technicians, will be handled at closing, including any transition employment agreements, non-solicitation obligations on the seller, and key employee retention arrangements.
Example Language
Seller shall use commercially reasonable efforts to facilitate Buyer's employment of all current full-time employees of the Dealership, including service technicians, parts counter staff, and sales personnel. Seller shall not solicit or encourage any employee to decline employment with Buyer. Buyer intends to offer employment to [all / identified key] employees on terms and conditions reasonably comparable to their current compensation and benefits. Seller shall provide Buyer with a complete organizational chart, employee roster, compensation schedule, and copies of all OEM technician certifications no later than [15] days after LOI execution. Seller agrees to a [12–24] month non-solicitation covenant with respect to Dealership employees.
💡 Technician retention is a top risk factor in dealership acquisitions. A departing master technician can materially impair service revenue. Buyers should identify which technicians hold brand-specific certifications (e.g., Husqvarna Master Technician, Kubota certified) and consider offering retention bonuses funded in part from the seller note holdback. Sellers should not over-promise employee retention — if key technicians are close to retirement or have expressed interest in leaving, disclose this early rather than risk a post-closing dispute.
Seller Transition and Non-Compete
Defines the seller's post-closing obligations to assist with transition, the duration and scope of any non-compete agreement, and compensation for the transition period.
Example Language
Seller agrees to provide transition assistance to Buyer for a period of [60–90] days following closing at no additional cost, including introductions to commercial and municipal accounts, assistance with OEM manufacturer relationships, and training on inventory management systems and supplier ordering processes. Following the transition period, Seller may be available for additional consultation at a rate of $[X] per day upon mutual agreement. Seller agrees to a non-compete covenant for a period of [3] years within a [50-mile] radius of the Dealership's primary location(s), covering the sale, service, and distribution of outdoor and power equipment.
💡 Non-compete scope should reflect the actual competitive geography of the market. In rural markets, a 50-mile radius may be appropriate; in dense suburban markets, 25 miles may suffice. Buyers acquiring from a retiring seller who has no interest in returning to the industry should still include the covenant — it protects against a seller re-entering as a dealer for a competing brand. Commercial account introductions during transition are particularly valuable; consider structuring a portion of the earnout around successful account retention to align the seller's incentives.
Exclusivity and No-Shop Provision
Prevents the seller from soliciting or entertaining other offers during the due diligence and negotiation period following LOI execution.
Example Language
From the date of execution of this LOI through the earlier of closing or termination, Seller agrees not to solicit, negotiate, or entertain offers from any other party for the acquisition of the Dealership or its assets ('Exclusivity Period'). Seller shall promptly notify Buyer if any unsolicited third-party inquiry is received. The Exclusivity Period shall be [60] days, extendable by mutual written agreement.
💡 Exclusivity is standard and should be insisted upon by buyers before investing significant due diligence costs. Sellers should ensure the exclusivity period is time-bounded and tied to buyer performance milestones — if the buyer fails to provide a diligence request list within 10 days of LOI signing, for example, the seller should have the right to terminate exclusivity. 60 days is appropriate for dealership transactions given OEM approval timelines.
Inventory Adjustment Mechanism and Audit Methodology
The single most negotiated term in dealership acquisitions. Buyers need a clear, pre-agreed methodology for valuing new equipment at invoice cost, used equipment at market value, and parts at cost with write-downs for aged or dead stock. Sellers want predictability and a cap on write-downs. Agree on the auditor, the write-down triggers, and the dollar-for-dollar price adjustment mechanism before signing the LOI to avoid a re-trade at closing.
OEM Approval as a Closing Condition vs. Earnout Trigger
Determine whether OEM dealer agreement transfer is a hard closing condition (deal dies if not obtained) or an earnout trigger (deal closes and earnout payments are contingent on approval). For primary OEM brands generating the majority of revenue, this should be a hard closing condition. For secondary brands, an earnout structure may be acceptable. Never assume OEM approval will be automatic — it must be treated as a material risk and documented accordingly.
Floor Plan Credit Facility Assumption or Replacement
Clarify whether the buyer will assume the seller's existing floor plan credit line, obtain a new facility, or pay down floor plan inventory at closing. This affects working capital needs significantly. If the buyer must establish a new floor plan facility, confirm that the SBA lender will permit this structure and that adequate working capital is reserved. The LOI should state which party is responsible for floor plan payoff and how the payoff amount will be verified.
Earnout Structure Tied to Revenue and Account Retention
If an earnout is included, define the measurement period, the specific revenue or account retention metrics, who has accounting control, and how disputes are resolved. For dealership earnouts, tying payments to commercial and municipal account revenue retention over the first 12–24 months is appropriate. Avoid earnouts based on EBITDA, which is too easily manipulated by buyer operating decisions. Gross revenue by customer category is a cleaner metric.
Real Estate Terms: Lease Assignment or Purchase Option
If the dealership operates from leased premises, confirm that the lease is assignable to the buyer and that the remaining term is at least 3–5 years or includes a renewal option. If the seller owns the real estate, determine whether it will be included in the transaction, sold separately, or leased back to the buyer. A dealership without secure real estate tenure is significantly harder to finance under SBA guidelines and less valuable to buyers who need facility stability for OEM compliance.
Find Outdoor & Power Equipment Dealer Businesses to Acquire
Enough information to write a strong LOI on day one — free to join.
Yes, and this is the most critical step in the entire transaction. Most OEM dealer agreements contain clauses that require manufacturer consent before the dealer agreement can be assigned to a new owner, and some agreements — particularly STIHL and certain Kubota arrangements — are not assignable at all, meaning the manufacturer must issue a new agreement directly to the buyer. Some manufacturers also retain a right of first refusal to purchase the dealership assets themselves. Buyers should request copies of all dealer agreements in the first week of due diligence and initiate OEM notification as early as possible. Do not commit significant capital or release due diligence contingencies until you have written confirmation of the manufacturer's approval process and timeline.
Inventory is typically valued at cost and adjusted at closing based on a physical count. New equipment on floor plan is valued at dealer invoice cost, often net of any manufacturer holdbacks owed to the seller. Used equipment is valued at the lower of cost or current market value using a recognized guide or appraiser. Parts inventory is valued at dealer cost with write-downs applied to slow-moving or obsolete stock — commonly defined as parts with no sales activity in the trailing 12 months or parts discontinued by the OEM. The LOI should specify the auditor, the write-down criteria, and the price adjustment mechanism so there are no surprises at closing. Inventory valuation disputes are the leading cause of dealership deal re-trades.
Yes. Outdoor and power equipment dealerships are generally SBA 7(a) eligible, and SBA financing is the most common structure for acquisitions in the $1M–$5M range. The SBA 7(a) program can finance up to 90% of the transaction value, including goodwill, equipment, and inventory. However, SBA lenders will require that seller notes be on full standby for at least 24 months, that floor plan facilities be addressed separately, and that the buyer demonstrate relevant industry or management experience. Buyers should engage an SBA-experienced lender early in the process and confirm that the specific deal structure — including inventory as a collateral component — meets lender requirements before executing the LOI.
Floor plan financing — the revolving credit line used to purchase new equipment inventory from manufacturers — does not automatically transfer to the buyer. In most transactions, the seller's floor plan balance is paid off at closing from sale proceeds, and the buyer establishes a new floor plan facility with the same lender or a different provider. This is a significant working capital consideration: the buyer must either have sufficient capital to fund the floor plan independently or have a committed floor plan facility in place before closing. Buyers should confirm floor plan lender requirements as early as possible, since some lenders require dealer approval from the OEM before extending a floor plan credit line to a new owner.
Most dealership acquisitions take 90–150 days from executed LOI to closing, with OEM manufacturer approval being the primary variable. Simple transactions with one or two OEM brands and a cooperative manufacturer may close in 90 days. Complex transactions involving multiple OEM brands, SBA financing, real estate, and slower manufacturer processes can take 120–180 days. Sellers should begin OEM relationship conversations before going to market, and buyers should build a realistic timeline into their financing commitments and exclusivity periods to avoid artificial pressure near closing.
A non-compete of 3–5 years within a 25–50 mile geographic radius is standard and defensible in most markets. The scope should reflect the actual competitive territory of the dealership — in rural markets where the dealership serves customers across a wide area, a broader radius is appropriate. The covenant should cover the sale, service, and distribution of outdoor and power equipment under any OEM brand, not just the specific brands sold at the time of the transaction. Courts generally enforce reasonable dealership non-competes because the seller's relationships and goodwill are a core component of what the buyer is purchasing. Sellers should negotiate the geographic scope carefully if they have other business interests in the region.
More Outdoor & Power Equipment Dealer Guides
More LOI Templates
Get enough diligence data to write a confident LOI from day one.
Create your free accountNo credit card required
For Buyers
For Sellers