Letter of Intent Guide for Child Care Acquisitions

Key Takeaways

• State the price as a defined multiple of a defined earnings figure, so later adjustments become arithmetic instead of argument.
• Say what the price includes and excludes. Tuition prepayments, accrued leave, and deposits are real money.
• Mark plainly which sections are binding. Confidentiality and exclusivity usually are; price and structure usually are not.
• Size exclusivity to the regulatory path rather than to a habit, and ask for an extension tied to agency delay.
• Put your conditions in the letter. A condition first raised in the purchase agreement looks like a retrade.

What a letter of intent is actually for

It does three jobs. It records what the parties think they agreed to, before memory drifts. It buys the buyer a period of exclusivity in exchange for the expense of diligence. And it exposes disagreements early, while walking away is still cheap. A good letter is two to four pages and reads as though a stranger could work out the deal from it.

It is not a purchase agreement and should not try to be. The covenants, representations, indemnities, and closing mechanics belong in the definitive document, which is described in the purchase agreement explained. If the letter starts sprouting warranty language, the deal is being drafted twice and the second draft will disagree with the first.

Define the price basis, not just the price

A number alone is fragile. Write the arithmetic. Something in the shape of a stated multiple applied to seller's discretionary earnings for a defined trailing twelve-month period, as reported on the business tax returns and adjusted for specified items, gives everyone the same starting point. Then state which adjustments you have accepted, in a list, rather than referring to an attachment nobody will find later.

The reason is practical. When diligence shows that one add-back was overstated, a defined basis lets you say the multiple has not changed, only the earnings figure. Without it, any price movement reads as bad faith, and sellers dig in. The same discipline is what keeps a deal from becoming one of the errors catalogued in mistakes child care buyers make.

Say exactly what is being bought

Child care deals carry line items that generic templates miss. Write out the treatment of each one.

Item	Weak letter of intent	Stronger version
Structure	Purchase of the business	Asset purchase of named assets, with excluded assets listed
Working capital	Silent	Delivered at a stated target, trued up after closing
Tuition prepayments and deposits	Silent	Credited to buyer at closing on a stated schedule
Accrued staff leave	Silent	Quantified and allocated between the parties
Licensing and utility deposits	Silent	Assigned or reimbursed, named explicitly
Curriculum, vehicles, and equipment	Assumed included	Listed, with exclusions named
Franchise transfer fee	Silent	Allocated, with the consent process acknowledged
Seller role after closing	To be discussed	Defined weeks, scope, and compensation

Prepaid tuition is the one buyers most often overlook. Families pay in advance for care you will deliver, which means the cash has already been spent while the obligation transfers to you; the seller's side of that conversation is set out in tuition deposits and prepayments at closing.

Handle enrollment with a mechanism, not a hope

Enrollment moves between signing and closing, and pretending otherwise produces a fight in the final week. Build the adjustment into the letter.

A workable shape: price is based on 92 full-time equivalent children enrolled as of the date of this letter, measured by a defined method; if the count at closing is within three of that figure, no adjustment; beyond the collar, the price adjusts by a stated amount per full-time equivalent. Work an example. If closing enrollment is 84, the shortfall is eight, three are absorbed by the collar, and five adjust at $9,500 each for a reduction of $47,500.

Two details make the mechanism hold. Define full-time equivalent precisely, because a part-time school-age child and a full-time infant are not the same unit; the measurement method is covered in verifying enrollment and tuition. And define the measurement date and the source document, usually the enrollment system export and the tuition ledger on a stated day, so nobody recounts by hand on the morning of closing.

Tie exclusivity to the regulatory calendar

Exclusivity length should come from the licensing answer, not from a template. Child care licensing is administered state by state, and change-of-ownership requirements vary (Source: ChildCare.gov, retrieved 2026), so write the letter after you have asked the agency what your structure requires. Ask for an extension right triggered by agency processing time rather than by buyer delay, which is fair to both sides and usually accepted.

Use the same logic for the diligence period. A center with clean statements, a stable director, and a long assignable lease may need less time than one with a subsidy-heavy payer mix and an open inspection finding. Setting the period from the actual file, rather than from habit, is part of what the child care due diligence checklist is for.

Conditions belong in the letter

Name them now, in one short list, so that raising them later is not a surprise. The common set: satisfactory completion of diligence in the buyer's reasonable discretion, financing on terms acceptable to the buyer, landlord consent to assignment on acceptable terms, licensing approval or a clear written path to it, eligibility clearance for the individuals the state requires, and if the center is a franchise, franchisor consent and an acceptable transfer package. That last item has its own timeline and its own approval standard, which is why brand-affiliated deals need extra runway.

Add the staffing condition if it matters to you, and most of the time it should. A center whose director leaves at closing is a different business. Say what you need, whether that is a retention arrangement, an introduction before closing, or a stated notice sequence. Program-specific models such as buying a Montessori school can depend on credentialed staff who are genuinely hard to replace.

What to keep out

Leave out anything that commits you to a plan you have not tested. Do not name employees you intend to replace, do not promise tuition changes, and never include an instruction that leads anyone to contact staff or families before the seller is ready. Confidentiality in this industry is not a formality; a premature rumor costs enrollment, and the damage lands on the business you are trying to buy.

Also leave out the fantasy schedule. A closing date that ignores background clearances and inspection queues sets the whole deal up to look late when it is merely realistic. Let the letter reference a target date and an outside date, and let the outside date be honest. Sequencing after signing is covered in closing on a child care center.

Related

• Buy a child care center
• How the brokerage process works
• The purchase agreement explained
• Child care due diligence checklist
• Closing on a child care center
• Verifying enrollment and tuition
• Mistakes child care buyers make
• Buying a Montessori school
• Tuition deposits and prepayments at closing