Advice on LOI Terms for $10M Rev. Construction Bus.

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by a searcher from The University of Michigan - Stephen M. Ross School of Business
in Detroit, MI, USA

1yr ago

Advice on LOI Terms for $10M Rev. Construction Bus.

Hey everyone,

I’m in the process of negotiating an LOI for the sale of a construction services business and would love to get insights from those experienced in the general contractor space. The business serves a mix of residential, commercial, and industrial customers, generating around $10M in revenue with ~$1M in SDE.

I want to make sure I’m structuring the LOI in a way that protects my interests (lawyer is engaged) while keeping the deal attractive for the buyer. Some key areas I’m looking for guidance on the LOI and in general are:

Working Capital Adjustments: Any advice on what level of working capital requirements to keep in mind?
Transition Period & Non-Compete: What’s reasonable in terms of transition support and non-compete duration/terms?
Seller Commissions on Ongoing Deals: Has anyone structured agreements where the seller continues to earn a commission on projects secured post-sale?
Transition Period & Non-Compete: What’s reasonable in terms of transition support and non-compete duration/terms?
Red Flags to Watch For: Anything you’ve seen in past deals that I should be cautious about?
Due Diligence Resources: Any recommendations for checklists, templates, or tools to kick off due diligence efficiently?

Would love to hear from anyone who has gone through a similar process or has experience structuring deals in this space. Appreciate any advice you can share!

Thanks in advance!

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reply by a professional 1yr ago
from Villanova University in West Chester, PA, USA

Hi ^redacted‌, in terms of due diligence resources, we have an episode on due diligence on our podcast, Dealmaking with Laura DiFrancesco, available here, redacted

reply by a searcher 1yr ago
from The University of Chicago in Dallas, TX, USA

Ishan, how about bonding? I assume this is an area one would need to diligence as well. If the seller has a personal guarantee backing it, one would need to double check to make sure projects can still get bonded after the transaction.