A practical, field-tested LOI guide built for CCTV inspection, CIPP lining, and sewer repair acquisitions — covering equipment valuation, municipal contract transferability, and deal structure terms that hold up through due diligence.
An LOI (Letter of Intent) is the critical first written commitment between a buyer and seller in a sewer inspection and repair acquisition. In this industry, getting the LOI right matters more than in most trades businesses because of the complexity layered into the deal: equipment-heavy balance sheets with CCTV cameras, jetting trucks, and pipe-lining units that depreciate unevenly; municipal master service agreements that may require consent-to-assign from a government entity; and a licensed, certified workforce whose retention directly affects day-one revenue. A well-constructed LOI signals to the seller that you understand their business — not just the financials — and sets enforceable guardrails for the due diligence period that follows. In the lower middle market ($1M–$5M revenue), most sewer inspection and repair businesses trade at 3.5x–6x EBITDA depending on contract quality, equipment condition, and owner dependency. Your LOI should reflect a defensible valuation anchor tied to normalized EBITDA, spell out exactly which assets are included (particularly rolling stock and inspection technology), address the transferability of any municipal contracts that represent meaningful revenue, and establish exclusivity so the seller cannot shop your offer while you conduct equipment inspections and contract reviews. This guide walks through every section of a standard LOI with example language and negotiation notes tailored specifically to sewer inspection and repair deals.
Find Sewer Inspection & Repair Businesses to Acquire1. Parties and Transaction Overview
Identifies the buyer entity, seller entity, and the legal structure of the proposed transaction — whether it is an asset purchase or stock/membership interest purchase. In sewer inspection and repair deals, asset purchases are far more common because buyers want to cherry-pick equipment and contracts while leaving behind any environmental liability or regulatory exposure tied to prior operations.
Example Language
This Letter of Intent ('LOI') is entered into as of [Date] by and between [Buyer Legal Entity Name], a [State] [LLC/Corporation] ('Buyer'), and [Seller Legal Entity Name], a [State] [LLC/S-Corp] ('Seller'), with respect to Buyer's proposed acquisition of substantially all of the operating assets of Seller's sewer inspection, CCTV pipeline inspection, and trenchless pipe repair business operating under the name [DBA Name] ('the Business'), located at [Primary Operating Address]. The proposed transaction is structured as an asset purchase.
💡 Push for asset purchase structure in almost every scenario. Sellers may initially prefer a stock sale for tax reasons — consult your tax advisor on Section 338(h)(10) elections if the seller is an S-Corp, which can approximate asset purchase tax treatment for both parties. Flag early if the business holds any open EPA enforcement actions, prior environmental violations, or unresolved liability claims that could follow a stock deal.
2. Purchase Price and Valuation Basis
States the proposed total enterprise value, the EBITDA basis on which it is calculated, and the implied multiple. In sewer inspection and repair, the purchase price should explicitly reference which revenue streams are included in the EBITDA calculation — inspection, CIPP lining, spot repair, emergency response — and call out any add-backs the buyer is accepting or challenging before due diligence begins.
Example Language
Buyer proposes a total purchase price of $[X,XXX,000] ('Purchase Price'), representing approximately [4.5x] Seller's trailing twelve-month adjusted EBITDA of $[XXX,000] as represented by Seller. The Purchase Price is based on Seller's preliminary financial representations including normalized add-backs for owner compensation above market replacement rate, non-recurring equipment maintenance expenses, and personal vehicle expenses run through the business. The final Purchase Price shall be subject to confirmation of EBITDA and equipment condition during the due diligence period. Buyer reserves the right to adjust the Purchase Price if EBITDA varies by more than 10% from Seller's representations or if capital expenditure requirements for the equipment fleet exceed $[XX,000] within 24 months of closing.
💡 Anchor the multiple to verified EBITDA, not seller representations. Sewer inspection businesses often have equipment depreciation schedules that understate real capex needs. Request a full equipment list with purchase dates and service history before finalizing the multiple. If the seller's CCTV cameras or jetting trucks are more than 7–10 years old and showing deferred maintenance, price in a capex reserve and reflect it in the offer rather than negotiating post-LOI.
3. Deal Structure and Payment Terms
Specifies how the purchase price will be funded across equity, debt, seller note, and earnout. Sewer inspection and repair acquisitions under $5M frequently use SBA 7(a) financing, which limits seller note structure and prohibits certain earnout arrangements. If municipal contract retention is uncertain, an earnout tied to contract renewal can bridge valuation gaps between buyer and seller.
Example Language
The Purchase Price shall be funded as follows: (a) $[XXX,000] in Buyer equity at closing, representing approximately [10–15]% of the total purchase price; (b) $[X,XXX,000] in SBA 7(a) loan financing through [Lender Name], subject to loan approval and SBA program guidelines; (c) $[XXX,000] in a Seller-carried promissory note, subordinated to the SBA lender, bearing interest at [6]% per annum with a [24–36] month term, subject to SBA standby requirements; and (d) up to $[XXX,000] in performance-based earnout payments payable over [12] months post-closing, contingent on the retention of municipal service contracts representing no less than [75]% of the prior year contract revenue attributed to those accounts.
💡 If using SBA financing, confirm with your lender early whether the seller note requires a full standby period or partial standby. Sellers of sewer inspection businesses often underestimate how much municipal contract uncertainty affects earnout structure — frame the earnout as protecting both parties against an outcome neither can control, not as a price cut. On equity roll deals with PE platforms, sellers who retain 10–20% equity should negotiate anti-dilution protections and a clear path to liquidity at the platform's next monetization event.
4. Included and Excluded Assets
Explicitly lists the assets being acquired — particularly the equipment fleet, inspection technology, customer contracts, licenses, and trade name — and carves out any personal assets, real property if leased, or liabilities the buyer does not intend to assume. This section is especially important in sewer inspection deals where the equipment is central to enterprise value.
Example Language
The assets to be acquired by Buyer shall include, but are not limited to: (i) all CCTV pipeline inspection equipment including [describe: e.g., two RIDGID SeeSnake camera systems, one Envirosight ROVVER X crawler unit]; (ii) all jetting and hydro-vacuum trucks and trailers as identified in Exhibit A – Equipment Schedule; (iii) all pipe-lining and CIPP equipment including inversion drums, UV cure units, and related tooling; (iv) all assignable municipal, commercial, and residential service contracts and master service agreements; (v) all customer lists, project records, inspection reports, and digital work order data; (vi) the trade name '[Business Name]', associated phone numbers, website domain, and social media accounts; (vii) all transferable licenses, permits, and NASSCO certifications held by the Business entity (not individual employees). Excluded assets shall include: Seller's personal vehicle [VIN], any real property owned by Seller, and all personal financial accounts.
💡 Build the equipment schedule as an exhibit to the LOI, not a post-LOI deliverable. Sellers sometimes remove or swap equipment between LOI signing and closing. Specify serial numbers where possible for high-value units. Address real property separately — if the business operates from a yard or facility that the seller owns, negotiate a lease option at closing rather than leaving it undefined, as losing access to the operating yard post-acquisition can be operationally disruptive.
5. Municipal and Commercial Contract Transferability
Addresses the process for obtaining consent-to-assign from municipal and commercial clients whose contracts represent material revenue. This is a deal-critical section in sewer inspection acquisitions where a single municipality may represent 20–40% of annual revenue.
Example Language
Seller shall cooperate fully with Buyer during the due diligence period to identify all municipal and commercial service contracts requiring third-party consent to assignment. Seller shall use commercially reasonable efforts to obtain written consent-to-assign from all such counterparties prior to or concurrent with closing. In the event that any municipal contract representing greater than [15]% of the Business's trailing twelve-month revenue cannot be assigned without counterparty consent, and such consent is not obtained within [60] days of the execution of a definitive purchase agreement, Buyer shall have the right to either (a) terminate this LOI without penalty or (b) reduce the Purchase Price by a mutually agreed amount reflecting the loss of such revenue. Seller represents that no municipal contracts are currently in default, under active protest, or subject to pending termination notices.
💡 Do not skip this section or defer it to the purchase agreement. Municipal consent-to-assign can take 30–90 days depending on the government entity and procurement rules — starting the process early is essential to hitting a target closing date. Ask the seller directly whether any contracts auto-renew or require competitive rebidding, as a rebid risk within 12 months of closing materially affects value and should influence earnout structure.
6. Due Diligence Period and Access
Establishes the length of the due diligence period, the categories of information the buyer will review, and the access the seller will provide. In sewer inspection and repair, due diligence must cover financial records, equipment condition, environmental compliance history, technician licensing, and contract terms — each requiring different access and different experts.
Example Language
Buyer shall have [45–60] calendar days from the date of full LOI execution ('Due Diligence Period') to conduct financial, operational, legal, environmental, and equipment due diligence on the Business. Seller shall provide Buyer and Buyer's advisors with reasonable access to: (i) three years of tax returns, profit and loss statements, and balance sheets; (ii) all equipment maintenance records, service logs, and current lien documentation; (iii) all municipal and commercial contracts, renewal notices, and correspondence with contract counterparties; (iv) all technician certifications, NASSCO credentials, licensing documentation, and employee records; (v) environmental compliance records, EPA correspondence, and any prior violation notices or remediation orders; and (vi) operational software, inspection reporting systems, and customer databases. Buyer agrees to conduct all due diligence in a manner that minimizes disruption to ongoing operations and maintains confidentiality with respect to Seller's employees and customers.
💡 Forty-five days is generally the minimum workable timeline for a sewer inspection deal given equipment inspections, environmental reviews, and municipal contract verification. Push for 60 days if the business has a large equipment fleet or multiple municipal clients. Hire a third-party equipment appraiser familiar with CCTV and trenchless equipment — not a generic heavy equipment appraiser — as replacement cost estimates for inspection technology vary significantly by brand and model year.
7. Exclusivity
Grants the buyer an exclusive negotiating period during which the seller agrees not to solicit, entertain, or accept competing offers. This protects the buyer's investment in due diligence while giving the seller assurance that a serious buyer is engaged.
Example Language
In consideration of Buyer's commitment to conduct expedient and good-faith due diligence, Seller agrees that from the date of LOI execution through the earlier of (a) the expiration of the Due Diligence Period or (b) [75] calendar days from LOI execution, Seller shall not, directly or indirectly, solicit, initiate, encourage, or engage in discussions with any other party regarding the sale, merger, recapitalization, or transfer of the Business or its material assets ('Exclusivity Period'). Seller shall promptly notify Buyer in writing if any unsolicited third-party approach is received during the Exclusivity Period.
💡 Sellers who have been working with a broker may push back on exclusivity longer than 45 days. A 60–75 day exclusivity window is standard and reasonable for a deal of this complexity. If the seller resists exclusivity entirely, treat that as a red flag — it may indicate another buyer in process or a seller who is not fully committed to the transaction. The exclusivity provision is one of the few legally binding elements of a typical LOI.
8. Seller Transition and Employment Terms
Outlines the seller's role post-closing, including the length and structure of a transition period, compensation, and any non-compete or non-solicitation obligations. In sewer inspection businesses where the owner is the primary estimator and municipal relationship manager, transition terms are operationally essential.
Example Language
Seller agrees to remain actively engaged in the Business for a transition period of no less than [6] months and no more than [12] months following closing ('Transition Period'), in a consulting or employment capacity to be defined in the definitive purchase agreement. During the Transition Period, Seller shall actively support Buyer in (i) introducing Buyer to all key municipal and commercial clients; (ii) transferring knowledge of estimating practices, project management workflows, and vendor relationships; and (iii) assisting with the retention of key technicians and field supervisors. Seller shall be compensated at a rate of $[X,000] per month during the Transition Period. Seller agrees to a non-compete covenant covering [geographic area] for a period of [3] years post-closing, and a non-solicitation covenant covering employees and customers for [3] years post-closing, in each case subject to legal enforceability under applicable state law.
💡 For sewer inspection businesses where the owner holds key municipal relationships, do not accept a 90-day transition — it is almost never sufficient. Six to twelve months is standard and should be reflected in compensation expectations upfront. Non-competes in trades businesses are increasingly scrutinized by courts; make them as geographically and temporally reasonable as possible to maximize enforceability. If the seller is also the only NASSCO-certified project manager, factor workforce certification into the transition plan explicitly.
9. Conditions to Closing
Lists the conditions that must be satisfied before either party is obligated to proceed to a definitive agreement and closing. These protect both parties and define clear exit ramps if material issues surface during due diligence.
Example Language
Buyer's obligation to proceed to a definitive purchase agreement and closing is conditioned upon, among other things: (i) satisfactory completion of financial, operational, legal, and environmental due diligence; (ii) confirmation of EBITDA within [10]% of Seller's representations; (iii) equipment appraisal confirming no deferred capital expenditure exceeding $[XX,000] required within 24 months; (iv) receipt of consent-to-assign for municipal and commercial contracts representing no less than [80]% of trailing twelve-month contract revenue; (v) confirmation that all technicians required to perform licensed operations hold valid, transferable credentials; (vi) SBA loan approval or alternative financing commitment; and (vii) execution of a mutually acceptable definitive asset purchase agreement. Seller's obligation to proceed is conditioned upon receipt of a financing commitment letter from Buyer's lender within [30] days of LOI execution.
💡 The equipment appraisal and contract consent conditions are the most commonly contested. Sellers may push to remove the equipment capex condition, arguing that equipment age is priced into the deal — push back by making the capex threshold generous but maintaining the condition. SBA financing contingencies are standard and most experienced sellers of trade businesses understand them; if a seller insists on a non-contingent offer, ensure you have alternative financing firmly in hand before removing the contingency.
10. Confidentiality and Non-Binding Nature
Confirms that except for the exclusivity, confidentiality, and governing law provisions, the LOI is non-binding and that both parties must execute a definitive purchase agreement to be legally obligated to complete the transaction.
Example Language
Except for the provisions of Sections [7 – Exclusivity], [10 – Confidentiality], and [11 – Governing Law], which shall be legally binding upon both parties, this LOI is non-binding and does not create any legal obligation on the part of either party to consummate the proposed transaction. Both parties acknowledge that a binding transaction can only be created through execution of a mutually acceptable definitive asset purchase agreement. Each party agrees to maintain in strict confidence all information disclosed by the other party in connection with this LOI and the proposed transaction, and not to disclose such information to any third party without prior written consent, except to advisors, lenders, and attorneys bound by equivalent confidentiality obligations.
💡 Make clear which sections are binding in the LOI signature block itself, not just in the body of the document. Courts have occasionally found LOIs to be binding based on ambiguous language — use explicit binding/non-binding designations for each material section if your deal counsel recommends it. The confidentiality provision protects the seller from Buyer discussing acquisition conversations with the seller's municipal clients, employees, or competitors before closing.
Equipment Valuation and Capex Reserve
The purchase price multiple in a sewer inspection deal is only meaningful if applied to EBITDA that accounts for realistic equipment replacement costs. Negotiate a clear capex reserve or price adjustment mechanism tied to an independent equipment appraisal — covering CCTV crawlers, jetting trucks, CIPP lining rigs, and hydro-vacuum units — before the LOI is countersigned. A fleet with significant deferred maintenance can shift deal economics by $100K–$300K.
Municipal Contract Consent-to-Assign Threshold
Define the minimum percentage of municipal and commercial contract revenue that must be transferable (via consent-to-assign) for the deal to proceed at the agreed price. Industry standard in sewer inspection acquisitions is 75–85%. Below this threshold, negotiate either a price reduction formula or a buyer termination right rather than leaving the outcome undefined and creating post-closing disputes over earnout triggers.
Earnout Structure Tied to Contract Retention
If a meaningful portion of the purchase price is structured as an earnout, tie the earnout specifically to the retention and renewal of named municipal contracts rather than to aggregate revenue, which is harder to attribute. Set a measurement period of 12 months post-closing and define retention clearly — a contract that renews at reduced scope should be treated differently than a full renewal or a termination.
Seller Transition Period Length and Scope
Do not accept vague transition language. Negotiate a specific number of months, defined deliverables (client introductions, estimating knowledge transfer, staff retention support), and monthly compensation. For owner-operated sewer inspection businesses where the founder manages municipal relationships directly, six months is the realistic minimum — twelve months is preferable and often achievable if the seller is compensated fairly for the period.
Environmental Liability Carve-Out and Representations
Require specific seller representations in the LOI — confirmed in the definitive agreement — that no open EPA enforcement actions, unresolved spill incidents, or prior liability claims exist against the business. In a sewer and underground utility business, environmental exposure can be latent and material. Negotiate an indemnification obligation that survives closing for pre-closing environmental events, with a reasonable cap tied to the purchase price.
Working Capital Peg and Receivables Treatment
Establish a normalized working capital target at closing, particularly for the treatment of outstanding accounts receivable from municipal clients, which can have 45–90 day payment cycles. Define whether receivables are included in the purchase price or collected by the seller post-closing, and set a working capital peg with a post-closing adjustment mechanism to avoid disputes over timing differences in large municipal invoices.
Non-Compete Geographic Scope and Duration
Negotiate the non-compete to reflect the actual service territory of the business — typically a defined radius from the primary operating base or specific county/MSA coverage areas. Three years is standard in lower middle market trades acquisitions. Confirm enforceability under applicable state law before finalizing, as some states (notably California) significantly limit non-compete enforcement for asset purchase transactions.
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Most of the LOI is non-binding — it expresses intent but does not obligate either party to close. However, specific provisions are typically made binding: the exclusivity clause (preventing the seller from shopping the deal during due diligence), the confidentiality provision (protecting both parties' sensitive information), and occasionally the governing law clause. The binding sections should be explicitly labeled in the document. Buyers should not assume an LOI commits them to purchase, but should understand that walking away after exclusivity and significant seller cooperation has cost and reputational implications in a relationship-driven industry.
Sewer inspection and repair businesses in the lower middle market typically trade at 3.5x–6x trailing twelve-month adjusted EBITDA. The multiple varies based on contract quality (long-term municipal MSAs command premium multiples), equipment condition (a well-maintained, modern fleet supports higher multiples), revenue mix (recurring inspection contracts are valued higher than one-time repair work), and owner dependency (businesses where the founder can be replaced without revenue loss command higher multiples). A business at $400K EBITDA with strong municipal contracts and a certified crew might justify 5x–5.5x; a similarly sized business with aging equipment and a single large client might only support 3.5x–4x.
Address it explicitly in the LOI rather than deferring to the purchase agreement. Include a provision requiring the seller to use commercially reasonable efforts to obtain consent-to-assign from all municipal counterparties, set a threshold of contract revenue that must be transferable for the deal to proceed at the agreed price (typically 75–85%), and establish a price adjustment mechanism or buyer termination right if that threshold is not met. Begin the consent process as early as possible — municipal procurement offices move slowly, and some contracts may require board approval or public notice before assignment is permitted.
Asset purchases are strongly preferred in sewer inspection and repair acquisitions for two reasons: they allow buyers to select specific assets (equipment, contracts, trade name) while leaving behind unknown liabilities, and they provide a step-up in tax basis for depreciable assets like CCTV equipment and trucks, which can generate meaningful tax savings post-acquisition. Stock purchases may be requested by sellers seeking capital gains treatment on the full sale price, but the environmental liability exposure in a sewer and underground utility business — where prior spills, violations, or regulatory issues may be latent — makes inheriting the entire legal entity particularly risky without extensive environmental due diligence.
Plan for 45–60 days minimum. Sewer inspection and repair deals require multiple parallel workstreams: financial verification of 3 years of tax returns and EBITDA add-backs, independent equipment appraisal of CCTV cameras and jetting trucks, municipal contract review and consent-to-assign outreach, environmental compliance verification, technician licensing and NASSCO certification review, and SBA underwriting if using loan financing. Thirty-day due diligence periods are common in competitive deal processes but are genuinely insufficient for a business of this complexity — buyers who rush due diligence in this industry frequently discover deferred capex or contract issues post-closing that could have been priced into the deal.
Define four things: duration (minimum 6 months, ideally 12 for owner-operated businesses), role and deliverables (client introductions, estimating knowledge transfer, crew retention support), monthly compensation (typically $5,000–$10,000 per month depending on market and deal size), and non-compete/non-solicitation scope. In sewer inspection businesses where the owner holds municipal relationships and serves as the primary estimator, a vague 'seller will assist in transition' clause is meaningless — courts have found such provisions unenforceable when they lack specificity. Name the key clients the seller will introduce, the operational knowledge to be transferred, and the timeframe for each.
Yes — sewer inspection and repair businesses are generally SBA 7(a) eligible as operating businesses with verifiable cash flow and tangible assets. The SBA loan can be used to finance the business acquisition, working capital, and certain equipment, typically requiring 10–15% buyer equity at closing. Key considerations: the SBA limits seller note structure during the standby period, equipment used as collateral must be appraised, and environmental screening (Phase I ESA) may be required given the nature of the industry. Work with an SBA-experienced lender who has closed trades and home services deals — not all SBA lenders are familiar with equipment-heavy acquisitions or how to handle municipal contract revenue in underwriting.
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