Letter of Intent Template for Acquiring a Commercial Painting Contractor Business

Parties and Business Identification

Identifies the buyer entity, the seller, and the specific business being acquired — including the legal entity name, DBA, primary jurisdiction of operations, and contractor license numbers.

💡 Confirm at this stage whether you are acquiring the legal entity (stock purchase) or only the assets of the business (asset purchase). Most commercial painting acquisitions are structured as asset purchases to avoid inheriting undisclosed liabilities such as prior workers' compensation claims or OSHA citations. Verify the correct legal name on the contractor license before signing — license transferability varies by state and can affect deal timing significantly.

Purchase Price and Valuation Basis

States the proposed purchase price, the valuation methodology used (typically a multiple of EBITDA or SDE), and any adjustments tied to working capital, backlog, or equipment condition.

💡 Commercial painting businesses are typically valued on adjusted EBITDA after addbacks for owner compensation above a market-rate salary, personal vehicle expenses, and non-recurring items. Sellers frequently have informal addbacks that buyers will scrutinize closely — particularly if the tax returns show significantly lower earnings than the adjusted P&L. Push for three years of tax returns and corresponding accrual-basis financials before agreeing to a final price. Equipment and fleet condition can materially affect value — aging spray rigs, lifts, or vehicles may require significant capital replacement within the first 12 months.

Deal Structure and Financing

Describes how the purchase price will be funded, including the split between SBA financing, seller note, buyer equity, and any earnout component.

💡 SBA 7(a) financing is commonly used in commercial painting acquisitions and is well-suited to this industry given the asset-light nature of most businesses. The seller note serves both as a financing tool and as a post-close alignment mechanism — the seller has a financial incentive to support a clean transition of customer relationships and crew. If the seller resists a seller note, it may signal concern about post-close revenue retention. For PE platform or strategic acquirer deals, conventional financing with an earnout replaces the SBA structure.

Earnout Provisions

Defines any performance-based portion of the purchase price tied to post-close revenue, contract retention, or EBITDA, including measurement period, calculation method, and payment timing.

💡 Earnouts are most appropriate when the business has significant customer concentration — for example, where two or three general contractors or property management companies account for more than 40% of revenue. The earnout compensates the seller if those relationships transfer successfully and protects the buyer if they do not. Keep earnout periods short — 12 to 24 months is standard. Longer periods create disputes over attribution. Be specific about which accounts are included in Exhibit A and how revenue is defined — gross billings vs. net of subcontractor costs is a common point of contention in commercial painting deals.

Assets Included and Excluded

Specifies which assets are being acquired — including equipment, vehicles, contracts, customer lists, licenses, and trade name — and which assets are excluded, such as personal vehicles or real estate retained by the seller.

💡 In commercial painting acquisitions, the vehicle and equipment inventory is often one of the most disputed elements. Request a full fleet list with year, make, mileage, and current condition before signing the LOI. Clarify whether equipment is owned outright or subject to financing or lease obligations that will be assumed or paid off at close. Ensure that all contractor licenses and lead paint certifications are included as acquired assets and confirm with the relevant licensing authority whether they are transferable in the applicable state.

Transition and Seller Involvement

Outlines the seller's post-close role, including any consulting or employment agreement, duration, compensation, and non-compete terms.

💡 Transition period and non-compete terms are especially important in commercial painting because owner relationships with general contractors and property management companies are often the business's primary competitive moat. A seller who refuses a meaningful non-compete — or who insists on a very short transition — is a yellow flag. For SBA deals, a non-compete of at least two years is typically required by the lender. If the seller is staying on in a meaningful operations role post-close, consider structuring that as a separate employment or consulting agreement outside the LOI to avoid deal complexity.

Key Employee Retention

Addresses the retention of critical foremen, project managers, and estimators whose departure would materially affect post-close operations.

💡 Crew and foreman retention is one of the highest-risk elements of any commercial painting acquisition. The skilled labor market is tight, and experienced lead painters and foremen are difficult to replace. Identify the two or three individuals whose departure would most impair operations — typically the senior estimator, the lead foreman, and any project manager overseeing major accounts. Consider whether retention bonuses funded partly by the seller note make sense. Do not allow the seller to discuss the sale with employees without your involvement — unsupervised disclosure can trigger crew departures before close.

Due Diligence Period and Exclusivity

Establishes the length of the due diligence and exclusivity period, what access the buyer will have to records and personnel, and the confidentiality obligations of both parties.

💡 Sixty days is a reasonable exclusivity window for a commercial painting acquisition of this size. Due diligence on painting contractors is moderately complex — you need time to review three years of financials, verify bonding capacity and surety relationship, assess workers' comp experience modifier and claims history, conduct a fleet inspection, and engage with the SBA lender. Do not compress due diligence to less than 45 days. Key documents to request immediately: tax returns and accrual P&Ls for three years, current certificate of insurance, workers' comp loss runs for three years, bonding capacity letter from surety, OSHA 300 logs, and a list of all active contracts with expiration dates.

Conditions to Close

Lists the specific conditions that must be satisfied before the buyer is obligated to proceed to closing, including financing, licensing, contract assignments, and employee retention.

💡 Bonding capacity transfer is a condition that is frequently overlooked until late in the process — raise it immediately. Surety companies underwrite the owner individually, and bonding does not automatically transfer with the business. The buyer will need to establish a new surety relationship, which takes time and depends on the buyer's own financial strength and experience. If the business does significant public or institutional work requiring bonds, this condition can delay or derail a close. Begin conversations with a surety broker during the due diligence period, not after.