Letter of Intent Template for Acquiring a Solar Installation Business

Buyer and Seller Identification

Identifies the acquiring entity and the selling entity with specificity, including state of organization, license holder names, and whether the transaction is structured as an asset purchase or stock/membership interest purchase. In solar, this distinction is critical because contractor licenses, utility interconnection agreements, and manufacturer dealer authorizations may or may not transfer depending on structure.

💡 Buyers should push for an asset purchase to avoid inheriting unknown warranty liabilities and permit violations. Sellers often prefer a stock sale for tax efficiency. Negotiate which licenses, utility agreements, and manufacturer authorizations will be novated versus re-applied for post-close, and build a timeline for license transfer into the exclusivity period.

Purchase Price and Valuation Basis

States the proposed purchase price, the EBITDA or SDE basis on which it is calculated, and the normalization adjustments applied. Solar businesses require careful EBITDA normalization for owner compensation, non-recurring incentive income tied to SREC sales or one-time utility rebates, and project timing that may artificially inflate or deflate any single year's results.

💡 Sellers should document and defend every normalization add-back with supporting schedules before the LOI is signed. Buyers should resist including SREC income or one-time utility rebates in run-rate EBITDA without verification of ongoing eligibility. Disagreements over the C&I pipeline value are common — consider setting a defined earnout for any commercial projects signed pre-close but not yet completed.

Deal Structure and Financing

Outlines how the purchase price will be funded, including the split between SBA financing, seller note, buyer equity, and any earnout. Solar acquisitions frequently use SBA 7(a) loans, which require the business to meet SBA eligibility standards and the buyer to inject a minimum of 10% equity. Seller notes of 5–15% are common and often required by SBA lenders.

💡 Sellers should obtain pre-qualification confirmation from an SBA lender familiar with solar businesses before accepting an LOI that is fully SBA-dependent. Buyers should disclose upfront any concerns about SBA eligibility, particularly if the business has significant subcontractor labor (which can affect SBA affiliation rules). Negotiate the seller note terms carefully — a 12-month standby is standard SBA practice but sellers should push for the shortest standby period the lender will allow.

Earnout Structure

Defines the conditions, calculation methodology, and payment timing for any variable consideration tied to post-close performance. Earnouts are especially important in solar M&A because project pipelines are lumpy, cancellation rates on signed residential contracts can be material, and post-close policy changes in net metering or ITC can affect the conversion rate of backlog into revenue.

💡 Buyers should define 'revenue' precisely — specify whether battery storage upsells, service contract renewals, and change orders on pre-close projects count toward earnout thresholds. Sellers should insist on anti-sandbagging protections preventing Buyer from deliberately delaying project completions to suppress Year 1 revenue. Consider a revenue earnout rather than EBITDA earnout when the seller has limited post-close control over cost decisions.

Exclusivity and Timeline

Establishes an exclusivity period during which the seller agrees not to solicit or entertain competing offers, and sets target milestones for due diligence completion, purchase agreement execution, and closing. Solar transactions require extra time in due diligence given the complexity of warranty registers, license verification, and utility agreement review.

💡 Sellers should resist exclusivity periods longer than 60 days without milestone-based termination rights if Buyer fails to deliver issues list or draft purchase agreement on schedule. Buyers should use the first 10 days to order a third-party warranty audit and confirm SBA lender pre-approval status. Build in a 15-day extension option tied to SBA processing delays, which are common in solar due to lender unfamiliarity with the industry.

Due Diligence Scope

Lists the specific categories of documents and information the buyer will review during exclusivity. In solar M&A, due diligence must extend beyond standard financial review to include workmanship warranty exposure, permit compliance history, NABCEP certification status of key technicians, and the stability of net metering access in the seller's primary markets.

💡 Sellers should prepare the warranty liability register before going to market — buyers will almost always commission a third-party workmanship liability assessment, and sellers who arrive with a proactive register signal professionalism and reduce the risk of a post-LOI price chip. Buyers should pay particular attention to roof penetration warranty exposure, which can represent the largest contingent liability in a residential solar portfolio.

Representations and Warranties Preview

Summarizes the key representations Seller will be asked to make in the definitive purchase agreement, flagged at the LOI stage to surface any known issues early. Solar-specific reps cover license good standing, absence of warranty claims, accuracy of system performance data, and compliance with applicable net metering and interconnection rules.

💡 Sellers should review their warranty liability register carefully before agreeing to a blanket 'no unresolved claims' rep — even minor customer complaints documented in email can constitute a claim under broadly worded definitions. Negotiate a materiality threshold (e.g., claims exceeding $[10,000] individually or $[25,000] in aggregate) before breach of warranty is triggered. Buyers should push for a survival period of at least 24 months on warranty-related reps given the multi-year nature of roofing and workmanship exposure.

Transition Support and Non-Compete

Defines the post-close obligations of the seller to support knowledge transfer, customer relationship handoff, and operational continuity. In solar, seller transition support is especially critical for maintaining utility interconnection relationships, transferring key commercial customer accounts, and ensuring NABCEP-certified crew retention during the transition period.

💡 Buyers should tie transition compensation to milestone completion rather than pure time passage — for example, 50% paid monthly and 50% upon successful transfer of all utility interconnection agreements and commercial account introductions. Sellers should negotiate a floor on transition obligations — specify a maximum weekly hour commitment (e.g., 20 hours per week) to avoid open-ended consulting demands. Non-compete scope should be narrowly defined by geography and service type, particularly if the seller plans to remain active in adjacent businesses such as electrical contracting.

Confidentiality and No-Shop

Establishes mutual confidentiality obligations and the seller's agreement not to disclose the pending transaction to employees, customers, or competitors during exclusivity. In solar, premature disclosure of a sale can trigger customer cancellations, technician departures, and manufacturer relationship uncertainty.

💡 Sellers with key employees who hold NABCEP certifications or utility contact relationships should negotiate for an employee retention plan to be funded by Buyer prior to any employee disclosure. Buyers should request the right to conduct confidential reference checks with two or three utility contacts without disclosing the nature of their inquiry. Define consequences for breach — in solar, a confidentiality breach that causes a key technician to resign or a major commercial customer to cancel could be quantified and treated as a purchase price adjustment.