Letter of Intent Template for Acquiring a PR & Communications Firm

Parties and Transaction Overview

Identifies the buyer entity, seller entity, and the nature of the transaction — whether it is structured as an asset purchase or stock purchase. For PR firms, asset purchases are common because buyers want to acquire client contracts, media databases, and brand assets while leaving behind unknown liabilities. Stock purchases may be preferred when client contracts are non-assignable without consent.

💡 Clarify early whether the deal is an asset or stock purchase. Many boutique PR firms operate as S-corps or LLCs, and sellers often prefer stock sales for tax treatment. Buyers should push for asset purchases to avoid inheriting undisclosed liabilities, particularly employment disputes or client billing disagreements. If key client contracts contain anti-assignment clauses — common in government or healthcare PR engagements — a stock purchase may be structurally necessary to preserve those relationships.

Purchase Price and Consideration Structure

Defines the total enterprise value, the allocation between cash at close, seller note, and earnout, and the equity injection requirement if SBA financing is involved. For PR firms, consideration structures almost always include a performance-based component tied to client retention, given the informal nature of most retainer agreements.

💡 The earnout structure is the most heavily negotiated element in PR firm acquisitions. Sellers will push for shorter earnout windows (12 months) and lower retention thresholds (75–80%), while buyers should target 24-month windows and 85–90% thresholds to account for natural churn in the first year post-transition. Tie earnout measurement specifically to retainer revenue, not total revenue, to exclude one-time project work that inflates performance. Ensure the earnout agreement includes a clause requiring the buyer to not materially change pricing, service scope, or key personnel in a way that would artificially suppress earnout achievement.

Valuation Basis and Adjustment Mechanisms

Establishes the financial basis for the purchase price — typically a multiple of trailing twelve-month EBITDA or seller's discretionary earnings (SDE) — and defines how adjustments will be made for working capital, client churn discovered in due diligence, and any revenue reclassifications between recurring and project-based work.

💡 PR firm owners frequently include project revenues in their retainer revenue figures to maximize valuation. Require the seller to provide a revenue schedule broken down by client, engagement type (retainer vs. project), start date, and most recent renewal date. Any revenue from clients whose last signed agreement is more than 18 months old should be treated as at-risk revenue and discounted in the valuation. EBITDA add-backs for owner compensation, personal vehicle expenses, and above-market owner salary are common and should be scrutinized carefully.

Due Diligence Period and Access

Defines the length of the due diligence period, the scope of access the buyer will have to financial records, client contracts, employee agreements, and operational systems, and the process for managing confidentiality during the review. PR firms require specialized due diligence focused on client contract quality, talent retention risk, and the transferability of founder relationships.

💡 Fifty to sixty days is standard for a PR firm given the complexity of reviewing informal client relationships. Push for access to the account team leads — not just the founder — early in due diligence. The account team's perception of the acquisition will heavily influence whether they stay post-close. Also request a list of all clients lost in the past three years and the stated reason for departure; voluntary churn driven by budget cuts is less concerning than churn driven by service dissatisfaction or personal relationships with the departing founder.

Key Person and Transition Obligations

Addresses the single most important risk in any PR firm acquisition: the dependency of client and media relationships on the founder or a small group of senior account executives. This section defines the seller's post-close transition commitment, the structure of any consulting or employment agreement, and consequences if the seller violates transition obligations.

💡 Sellers will resist long transition periods, especially those over 18 months, and will push for consulting arrangements that give them flexibility to pursue other work. Structure the TSA so that earnout payments are partially conditioned on transition compliance — this creates a financial incentive for the seller to actively transfer relationships rather than simply showing up for introductory calls. Be explicit about what 'client relationship transfer' means: it should include documented handoffs, formal introductions, and a review period where the Buyer's team shadows the seller on client communications.

Non-Compete and Non-Solicitation

Establishes the geographic, temporal, and functional scope of the seller's non-compete agreement and the non-solicitation provisions covering both clients and employees. In PR firms, these provisions are critical because the seller's Rolodex and media relationships are the business, and an unconstrained seller could rebuild a competing practice within months.

💡 Enforce-ability of non-competes varies significantly by state — California, Minnesota, and North Dakota effectively prohibit them, while most other states enforce reasonable restrictions. If the seller operates in a state with weak non-compete laws, negotiate a stronger non-solicitation clause as an alternative. SBA lenders require non-compete agreements from sellers as a condition of 7(a) loan approval. Sellers will push to narrow the scope by industry vertical (e.g., 'healthcare PR only') or geography; push back if the firm serves clients nationally or across multiple verticals.

Exclusivity and No-Shop Provision

Grants the buyer an exclusive negotiating period during which the seller agrees not to solicit, entertain, or accept offers from other potential acquirers. This is particularly important in PR firm deals where founders may be running informal parallel processes with competing agency groups.

💡 Sellers in competitive markets — especially those represented by brokers running structured processes — will resist exclusivity provisions or push for shorter windows (30–45 days). In a competitive process, you may need to move quickly to LOI and accept a shorter exclusivity window in exchange for a compelling offer price. If you are conducting SBA financing, make sure your exclusivity window accounts for lender processing time, which can add 4–6 weeks to a timeline.

Conditions to Closing

Lists the material conditions that must be satisfied before either party is obligated to close the transaction, including satisfactory completion of due diligence, financing contingency, third-party consents for client contract assignments, and execution of key employee retention agreements.

💡 The client consent condition is the most deal-sensitive provision in a PR firm LOI. Many retainer agreements — if they exist in writing at all — contain anti-assignment clauses requiring client consent for any change of ownership. Requiring 75% consent thresholds by revenue creates a hard floor; anything below that means a material portion of the revenue base is at risk on day one. Sellers will resist this condition because reaching out to clients for consent can tip off the market about the sale. Consider structuring the consent outreach to occur only after the definitive agreement is signed, with closing held in escrow pending receipt of consents.

Confidentiality

Establishes the mutual obligation of both parties to keep the terms of the LOI and all due diligence materials confidential, with specific carve-outs for disclosures required by lenders, legal counsel, and accountants involved in the transaction.

💡 Confidentiality is especially sensitive in PR firm deals because the seller's employees, clients, and industry peers are often closely networked. A premature disclosure that the firm is for sale can trigger client anxiety, employee departures, and competitive poaching. Consider whether a separate, more detailed NDA should be executed prior to the LOI to govern due diligence document exchange. Include a specific provision prohibiting either party from disclosing the transaction to the seller's employees until an agreed communication plan is in place post-signing.

Binding vs. Non-Binding Provisions

Clarifies which sections of the LOI are legally binding and which represent non-binding expressions of intent. Standard practice is for most financial and deal terms to be non-binding while exclusivity, confidentiality, and governing law provisions are binding.

💡 Make this section explicit and unambiguous. Courts have found LOIs to create binding obligations when the language is unclear, which can create unwanted liability for either party. If you are negotiating in a state with strong implied duty of good faith doctrines, be especially careful about language suggesting exclusivity on deal terms. Have legal counsel review the binding vs. non-binding language before execution.