A roofing-specific LOI framework covering purchase price, earnouts, exclusivity, and the key terms that matter most when buying a residential, commercial, or insurance restoration roofing contractor.
A Letter of Intent (LOI) is the foundational document in any roofing business acquisition. It signals your seriousness as a buyer, establishes the economic terms of the deal, and creates a period of exclusivity during which you conduct due diligence before drafting a definitive purchase agreement. In the roofing industry, a well-constructed LOI must address factors unique to the trades: owner dependency on insurance adjuster relationships, subcontractor versus W-2 crew structures, warranty liability exposure, and the seasonality of revenue. Roofing businesses typically trade at 3x–5.5x SDE or EBITDA depending on revenue mix, crew quality, and how transferable the owner's relationships are. Your LOI should reflect those realities. Most roofing acquisitions in the $1M–$5M revenue range are structured with SBA 7(a) financing, a seller note, and sometimes an earnout tied to gross profit retention. The LOI is where those mechanics are first defined. A vague or generic LOI invites renegotiation later — a roofing-specific LOI protects both parties and accelerates the path to closing.
Find Roofing Businesses to AcquireBuyer and Seller Identification
Clearly identify the legal entities and individuals entering into the LOI. For roofing acquisitions, specify whether the buyer is an individual operator, an SBA borrower entity, or a platform acquirer. Note whether the transaction is structured as an asset purchase or stock purchase, as this affects license transferability.
Example Language
This Letter of Intent is entered into as of [DATE] by and between [BUYER ENTITY NAME], a [STATE] [LLC/Corporation] ('Buyer'), and [SELLER NAME], an individual, and [COMPANY LEGAL NAME], a [STATE] [LLC/Corporation] ('Company'). Buyer intends to acquire substantially all of the assets of Company, including customer relationships, contracts, equipment, vehicles, and goodwill, through an asset purchase transaction.
💡 Most roofing buyers prefer asset purchases to avoid inheriting undisclosed warranty liabilities, OSHA violations, or subcontractor disputes. Sellers sometimes push for stock sales for tax reasons — this is a key negotiation point that should be flagged early. If contractor licenses are not easily transferable in your state, discuss how the seller entity and licenses will be handled post-close.
Purchase Price and Valuation Basis
State the proposed purchase price, the valuation methodology used, and any adjustments that may apply based on due diligence findings. Roofing businesses are typically valued on a multiple of Seller's Discretionary Earnings (SDE) or EBITDA, adjusted for one-time items, owner compensation normalization, and working capital.
Example Language
Buyer proposes to acquire the Company for a total purchase price of $[AMOUNT] ('Purchase Price'), representing approximately [X.X]x the Company's trailing twelve-month SDE of $[AMOUNT] as reflected in the financial statements provided. The Purchase Price is subject to adjustment based on findings during the due diligence period, including but not limited to verification of revenues, warranty claim liabilities, and the condition of equipment and vehicles. A working capital peg of $[AMOUNT] will be established at closing, with dollar-for-dollar adjustments for shortfalls or excess.
💡 Roofing multiples range from 3x to 5.5x SDE. Higher multiples are justified by W-2 crews, diversified revenue across residential, commercial, and insurance restoration, strong Google review profiles, and documented estimating systems. Sellers with heavy owner dependency or reliance on a single insurance adjuster relationship should expect multiples at the lower end. Always verify that add-backs — vehicle expenses, owner health insurance, family payroll — are defensible to an SBA lender.
Deal Structure and Payment Terms
Outline how the purchase price will be funded, including the buyer equity injection, SBA loan proceeds, seller note, and any earnout component. Roofing acquisitions frequently use SBA 7(a) financing, which requires specific documentation and may limit seller note subordination terms.
Example Language
The Purchase Price shall be funded as follows: (i) approximately $[AMOUNT] from proceeds of an SBA 7(a) loan; (ii) a seller note in the amount of $[AMOUNT] bearing interest at [RATE]% per annum, payable over [24–36] months, subordinated to the SBA lender as required; and (iii) a buyer equity injection of $[AMOUNT]. In addition, Buyer proposes an earnout of up to $[AMOUNT] payable over [12–24] months post-close, contingent on the Company achieving gross revenues of at least $[AMOUNT] and gross profit margins of at least [X]% during the earnout period.
💡 SBA lenders typically require the seller note to be on full standby for 24 months post-close, meaning the seller receives no principal or interest during that period. Sellers are often surprised by this — address it early to avoid deal fatigue. Earnouts in roofing are most defensible when tied to gross profit dollars rather than revenue alone, since material costs and subcontractor rates fluctuate. Tie earnout payments to quarterly gross profit statements reviewed by both parties.
Assets Included and Excluded
Enumerate the specific assets being acquired and any items the seller is retaining. For roofing companies, this includes vehicles, ladders, equipment, job management software data, customer lists, brand and domain, and subcontractor relationships. Clearly exclude personal vehicles, owner life insurance, and any real estate unless separately negotiated.
Example Language
The transaction shall include all assets used in the operation of the Company's roofing business, including without limitation: all customer and prospect records, job history, and CRM data (including JobNimbus or AccuLynx databases); the Company's trade name, website, domain, phone numbers, and Google Business Profile; all vehicles, trailers, ladders, staging, equipment, and tools listed on Schedule A; all subcontractor agreements and supplier accounts; all assignable warranties from material manufacturers; and all permits, licenses, and certifications to the extent transferable. Excluded assets include: [OWNER'S PERSONAL VEHICLE], personal life insurance policies, and any real property owned by Seller personally.
💡 Google Business Profile and phone number portability are critical in roofing — inbound call volume and reviews are tied to those assets. Confirm in writing that the seller will transfer these. Also negotiate for access to supplier accounts with ABC Supply, Beacon, or other distributors, as pricing tiers are tied to purchase history and may reset under a new entity without a formal transfer.
Due Diligence Period and Access
Define the length of the due diligence period, what access the buyer requires, and the process for requesting and delivering information. Roofing-specific due diligence should cover financial records, warranty claims history, licensing and bonding status, subcontractor agreements, and insurance certificates.
Example Language
Buyer shall have [45–60] calendar days from the execution of this LOI ('Due Diligence Period') to conduct a thorough review of the Company. Seller agrees to provide, within 10 business days of LOI execution: (i) three years of federal tax returns and company financial statements; (ii) a complete list of all completed jobs for the past 36 months including job type, revenue, and gross margin; (iii) warranty claim history and any open claims; (iv) copies of all contractor licenses, bonds, and certificates of insurance; (v) subcontractor agreements and 1099 records; (vi) all active commercial contracts or maintenance agreements; and (vii) documentation of any OSHA inspections, contractor board complaints, or pending litigation. Buyer and Seller agree to use commercially reasonable efforts to keep all shared information confidential.
💡 Forty-five to sixty days is standard for roofing acquisitions of this size. If the seller is using a broker, request a data room upfront rather than piecemeal document delivery. Pay close attention to warranty claim patterns — a spike in claims in year two or three post-job is common in roofing and may indicate installation quality issues. Ask for the warranty claim dollar amount as a percentage of revenue for each of the past three years.
Exclusivity and No-Shop Provision
Establish a period during which the seller agrees not to solicit, negotiate, or entertain other offers. This protects the buyer's investment of time and diligence costs during the due diligence period.
Example Language
In consideration of Buyer's investment of time and resources in connection with the proposed transaction, Seller agrees that for a period of [60] calendar days from the date of execution of this LOI ('Exclusivity Period'), Seller will not, and will cause the Company not to, directly or indirectly solicit, initiate, encourage, or participate in discussions or negotiations with any third party regarding the sale, merger, recapitalization, or other disposition of the Company or its assets. Seller will promptly notify Buyer if any unsolicited offer or inquiry is received during the Exclusivity Period.
💡 Sixty days is appropriate for SBA-financed roofing deals given the lender's underwriting timeline. If you are a PE-backed platform buyer moving quickly, 45 days may be sufficient. Sellers represented by brokers may push back on exclusivity duration — a 30-day initial exclusivity with a 30-day extension option conditioned on buyer's written confirmation of continued interest is a reasonable compromise.
Seller Transition and Non-Compete
Address the seller's post-closing obligations, including a training and transition period and restrictions on competing against the business. Owner relationships with insurance adjusters, realtors, and commercial property managers are critical to revenue continuity in roofing.
Example Language
Seller agrees to provide a transition period of [60–90] days post-closing, during which Seller will be available to introduce Buyer to key insurance adjusters, commercial property managers, subcontractors, and referral sources, and will assist with the transfer of estimating workflows and project management systems. Following the transition period, Seller agrees to a non-compete restricting Seller from operating or owning any roofing contracting business within a [50]-mile radius of the Company's primary service area for a period of [3] years post-closing. Seller also agrees to a non-solicitation of employees and subcontractors for a period of [2] years post-closing.
💡 In roofing, the seller's relationships with insurance adjusters and preferred contractor program contacts are often the most valuable and fragile assets in the deal. A 90-day transition — not 30 days — is strongly recommended. Request that the seller personally accompany the buyer to meetings with the top five referral sources and two to three key insurance contacts during the transition window. Non-competes of three to five years and 50-mile radius are standard and generally enforceable in the trades sector.
Conditions to Closing
List the conditions that must be satisfied before the transaction can close. These protect the buyer if material issues are discovered during due diligence or if third-party approvals (such as SBA loan approval or license transfers) are not obtained.
Example Language
The obligations of Buyer to proceed to closing are conditioned upon: (i) satisfactory completion of due diligence in Buyer's sole discretion; (ii) receipt of SBA loan approval on terms acceptable to Buyer; (iii) transfer or reissuance of all required contractor licenses and bonds in Buyer's name or entity; (iv) no material adverse change in the Company's revenues, workforce, or customer relationships occurring between the LOI date and closing; (v) execution of a definitive Asset Purchase Agreement with representations, warranties, and indemnification provisions acceptable to both parties; and (vi) seller's key employees and subcontractors having agreed in writing to continue their relationships with the Company post-closing.
💡 License transferability varies significantly by state. In some states, contractor licenses are tied to a qualifying individual, not the business entity — which means the buyer must have or hire a licensed qualifier before closing. Identify this requirement early to avoid closing delays. The 'no material adverse change' condition is especially important in roofing given revenue seasonality — specify that a seasonal revenue decline does not constitute a MAC, but loss of a major commercial contract or departure of a lead estimator would qualify.
Earnout Structure Tied to Gross Profit, Not Just Revenue
In roofing acquisitions, revenue alone is a poor earnout metric because material costs, subcontractor rates, and storm-driven mix shifts can swing gross margins significantly. Negotiate earnouts tied to gross profit dollars over 12–24 months. This aligns seller incentives with actual business performance and protects the buyer if a post-close storm season inflates revenue but compresses margins due to subcontractor cost spikes.
Warranty Liability Allocation and Escrow
Roofing sellers carry contingent warranty obligations on every completed job. Negotiate a warranty escrow — typically 3–5% of purchase price — held for 12–24 months post-close to cover any warranty claims arising from pre-closing work. Define clearly which party is responsible for honoring manufacturer warranty registrations and workmanship guarantees on jobs completed before closing.
Seller Note Standby Period and SBA Compliance
SBA 7(a) lenders typically require seller notes to be on full standby for 24 months post-closing, meaning no principal or interest payments to the seller during that window. This is frequently a surprise to sellers and can kill deals late in the process. Address the standby requirement explicitly in the LOI so the seller understands the cash flow implications of accepting a seller note under SBA financing terms.
License and Bond Transfer Timeline
Contractor license and bond transferability is a hard closing condition in roofing. Negotiate a specific timeline — typically 30 days prior to expected closing — for the seller to provide all documentation needed for license applications, and for both parties to cooperate in submitting transfer or new license applications. If a qualifying individual license holder is leaving post-close, the buyer must have a licensed qualifier in place at closing or obtain a grace period from the relevant contractor licensing board.
Subcontractor and Crew Retention Commitments
In roofing businesses that rely on subcontractor crews rather than W-2 employees, the departure of one or two key subcontractor relationships post-close can meaningfully impair capacity. Negotiate for the seller to facilitate written introductions and relationship transfers to key subcontractors before closing, and include a representation that no subcontractor agreements are in default or have been verbally terminated as of the LOI date.
Find Roofing Businesses to Acquire
Enough information to write a strong LOI on day one — free to join.
Roofing businesses generating $1M–$5M in revenue typically sell for 3x–5.5x SDE or EBITDA. A business with W-2 crews, diversified revenue across residential, commercial, and insurance restoration, 100+ Google reviews, and documented estimating processes will command the higher end of that range. An owner-dependent business relying on one or two insurance adjuster relationships with inconsistent financials will trade at 3x–3.5x. Your LOI should state the proposed multiple explicitly — for example, '$1,800,000 representing 4.0x trailing twelve-month SDE of $450,000' — so both parties are aligned on the valuation basis before due diligence begins.
The vast majority of roofing acquisitions at this size are structured as asset purchases. Asset purchases allow the buyer to cherry-pick assets, avoid inheriting undisclosed liabilities such as warranty claims or OSHA penalties, and receive a step-up in tax basis on acquired assets. Stock purchases may be preferred by sellers seeking capital gains treatment on the full sale price, but they expose buyers to the full liability history of the entity. The LOI should specify the intended structure — asset or stock — because this affects how contractor licenses are transferred, how employee relationships are treated, and how the SBA lender structures the loan collateral.
Insurance restoration revenue requires careful treatment in LOI negotiations because it is inherently lumpy and weather-dependent. A single major hail event can inflate one year's revenue by 40–60% and then normalize the following year. When valuing a roofing business with significant restoration revenue, use a three-year average SDE rather than trailing twelve months if the most recent year was a storm year. Note this approach explicitly in the LOI valuation language to avoid seller pushback when adjusted financials come back lower during lender underwriting. Alternatively, structure an earnout that rewards the seller if post-close storm years generate above-baseline restoration volume.
The five most critical due diligence items for a roofing acquisition are: (1) three years of job-level revenue and gross margin data to identify customer concentration and verify claimed profitability; (2) warranty claims history by year expressed as a percentage of revenue; (3) copies of all contractor licenses, bonds, and certificates of insurance with expiration dates and qualifying individual names; (4) subcontractor agreements and 1099 records for the past two years to verify crew relationships and worker classification compliance; and (5) documentation of any OSHA inspections, contractor board complaints, or litigation. Request all five in the LOI due diligence section with a delivery deadline of 10 business days from LOI execution.
SBA financing shapes several LOI provisions in roofing deals. First, the seller note must typically be on full standby for 24 months, which means the seller receives no payments on that note during the first two years — address this in the payment terms section so there are no surprises. Second, SBA lenders require the business to demonstrate sustainable cash flow, so the LOI valuation and add-back schedule must be defensible to an underwriter, not just the parties. Third, SBA lenders will require the contractor licenses and business assets to be in the name of the borrowing entity at closing, which means license transfers must be completed before funding. Build a 60-day SBA approval condition into your LOI to give the lender adequate time for underwriting without pressuring the timeline.
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