LOI structure for recurring revenue

April 26, 2025

by a searcher from Dartmouth College - Tuck School of Business at Dartmouth in Hanover, NH, USA

Hey folks - I am trying to put together my first LOI for an interesting business with the following features: - B2B, 2-6 year contracts (need to understand concentration issues better) - Rapid 3-year growth in revenue and EBITDA - Sub-$1M EBITDA Any advice on structuring the LOI with sufficient protections on contracts? For that matter, does anyone have a sample LOI that they would be willing to share? Thank you!

Reply by a searcher
from Dartmouth College in Hanover, NH, USA

Thanks Clayton. I am wondering whether it would be prudent (or a non-starter) to add language in the LOI to connect a seller note to the integrity of contracts and renewals.

Reply by a professional
from Northwestern University in Chicago, IL, USA

How are you structuring the purchase? If it's an asset purchase agreement, make sure that the contracts are assignable otherwise need to make them as a closing condition to the purchase (or at the very least, the material contracts are transferable). Even if it's a stock purchase agreement, you should make sure how sticky these contracts are because some contracts can release the counterparty in stock sales. In short, the LOI, should assume that all (or a vast majority) of the contracts are assignable.

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