Letter of Intent Template for Acquiring a Trade School

Identification of Parties and Transaction Structure

Clearly identify the buyer entity, the seller, and the legal name of the school being acquired. Specify whether the transaction is structured as an asset purchase or a stock purchase. In trade school acquisitions, this distinction carries extraordinary weight — a stock purchase may preserve the school's existing accreditation, state license, and Title IV program participation agreement, while an asset purchase typically triggers formal COO notifications and re-approval processes with the accrediting body and state licensing agency.

💡 Sellers often prefer asset sales for tax reasons, while buyers frequently prefer stock purchases to retain accreditation and Title IV eligibility intact. Negotiate this early — switching structures mid-process can delay closing by 6–12 months if it triggers a new COO application with the accrediting body. If the school holds Title IV eligibility, confirm whether a stock purchase versus asset purchase triggers a 'change in ownership' under 34 CFR Part 600, as this determination affects whether the school must seek pre-approval from the Department of Education before closing.

Purchase Price and Valuation Basis

State the proposed purchase price, the methodology used to arrive at it, and the components of the consideration — including cash at close, earnout, and seller financing. Trade schools in this market typically trade at 3x–5.5x EBITDA, with the multiple heavily influenced by accreditation status, Title IV eligibility, enrollment trend direction, and job placement rate documentation.

💡 EBITDA normalization is critical in owner-operated trade schools, where personal expenses, family payroll, and above-market or below-market owner compensation are common. Expect significant negotiation around which add-backs are legitimate. Earnout provisions tied to enrollment and accreditation retention are standard and seller-friendly when framed as protecting the buyer's investment — sellers should not view these as punitive. Seller financing of 10–30% of the purchase price signals buyer commitment and is often required by SBA lenders as a condition of approval.

Due Diligence Conditions and Access

Define the scope, duration, and access requirements for the buyer's due diligence process. Trade school due diligence must go beyond financials to include accreditation files, Title IV program participation agreements, state licensing records, student enrollment data, completion and placement rates, instructor certifications, and regulatory compliance history.

💡 Sellers may resist disclosing accreditation correspondence out of concern that sharing internal audit findings creates liability or signals weakness. Frame this as standard practice — buyers cannot responsibly complete a transaction without understanding the regulatory baseline. Insist on a structured data room organized by category. If the seller has not yet engaged an education law attorney to map COO requirements, recommend they do so immediately — both parties benefit from understanding the regulatory timeline before the LOI is signed.

Accreditation and Regulatory Continuity Conditions

Explicitly address how accreditation, state licensure, and Title IV eligibility will be managed through and after the change of ownership. This is the most consequential section in any trade school LOI and should not be treated as boilerplate.

💡 This section is non-negotiable from a buyer's perspective — loss of accreditation or Title IV eligibility post-close can render the acquired school worthless within a single enrollment cycle. Sellers should understand that accrediting body COO processes can take 60–180 days and in some cases require a pre-approval visit. Build realistic timelines into the LOI and plan for a closing date that accommodates regulatory review periods. Some accrediting bodies require the buyer to demonstrate financial stability and educational management experience before approving a COO — buyers should be prepared to submit organizational documents, financial statements, and management bios.

Exclusivity and No-Shop Period

Establish a period during which the seller agrees not to solicit or entertain competing offers, giving the buyer adequate time to complete due diligence and finalize purchase documentation.

💡 Sixty days is often insufficient for trade school deals given the complexity of regulatory due diligence. Negotiate a 90-day exclusivity window with an extension right tied to accreditation or Title IV review timelines. Sellers should ensure the exclusivity clause does not prevent them from disclosing the pending sale to their accrediting body, state licensing agency, or the Department of Education, as many COO processes require proactive notification regardless of deal status.

Earnout and Enrollment Milestone Provisions

Define the specific performance metrics that will govern any post-close earnout payments, tying contingent consideration to measurable operational and regulatory outcomes that reflect the school's ongoing health.

💡 Sellers should negotiate earnout metrics that are within their control during any transition period where they remain involved as a consultant or director. Tying earnout to accreditation status is reasonable, but sellers should push back on enrollment targets that assume no enrollment disruption from the ownership change itself — students and prospective enrollees may delay decisions during a visible ownership transition. Consider a blended metric that includes both enrollment headcount and revenue per enrolled student to capture pricing and program mix changes.

Seller Transition and Consulting Obligations

Outline the seller's post-closing obligations to support operational continuity, including any consulting or training period and key introductions to accrediting bodies, employer partners, and state licensing contacts.

💡 Transition support is especially critical in trade schools where the founder is the face of the institution — students, instructors, and employer partners may have decade-long relationships with the outgoing owner. A 12-month consulting agreement is typical; shorter periods create meaningful key-person risk. Sellers should ensure the consulting agreement includes clear scope limits and indemnification language so they are not exposed to liability for post-close operational decisions made by the buyer.

Representations and Warranties Framework

Identify the key representations and warranties that the seller will be expected to make in the definitive purchase agreement, with particular emphasis on regulatory compliance, enrollment accuracy, and accreditation status.

💡 Sellers should engage an education law attorney to review all rep and warranty language before agreeing to the framework. In trade school deals, reps around accreditation status and Title IV compliance carry outsized risk — buyers will seek broad indemnification for any breach. Negotiate caps on indemnification liability tied to the purchase price and carve out known risks that have been disclosed during due diligence. Buyers should insist on survival periods of at least 3 years for regulatory and accreditation representations, as violations can take years to surface.

Confidentiality and Non-Solicitation

Protect both parties during the LOI period by establishing mutual confidentiality obligations and preventing the solicitation of the school's instructors, staff, or enrolled students.

💡 Non-solicitation of staff is particularly sensitive in trade schools, where experienced instructors with active certifications are difficult to replace and their departure can trigger enrollment disruption and accreditation concerns. Sellers should also request a reciprocal non-solicitation clause preventing the buyer from approaching the school's employer partners for unrelated business purposes if the deal does not close.