Letter of Intent Template: Buying a Business in Australia (Free Download)

A letter of intent when buying a business in Australia — sometimes called a heads of agreement or term sheet — is the document that puts your ballpark offer on the table before you commit to serious due diligence. It's non-binding on commercial terms, and in my view it should stay deliberately lightweight: no deposit, no exclusivity at this stage.

This template is built for buyers acquiring service businesses and trades businesses in Australia: plumbing, electrical, landscaping, cleaning, HVAC, pest control — businesses in the $200K–$2M range where the deal structure is relatively straightforward but the details still matter enormously.

The Two-Stage Process (And Why It Works)

Most buyers try to cram everything into a single LOI — price, exclusivity, deposit, conditions. That creates friction before you even know whether the deal is real. Here's a better approach.

Stage 1: The LOI — get a ballpark on the table fast. You put in a quick offer based on what you know so far. No deposit (deposits are a hassle to get back and unnecessary at this point). No exclusivity. The LOI gives you 30 days to do preliminary work and finalise your offer. If the seller is comfortable with your ballpark, you move to Stage 2. If not, you've lost nothing.

Stage 2: The Exclusivity Agreement — now you commit real resources. Once the seller accepts your ballpark range, you sign a separate 60-day exclusivity agreement. This is where you engage lawyers, accountants, and run full due diligence. The exclusivity agreement includes a break fee — say $50,000 — payable by the seller to cover your third-party costs if they walk away or reject your final offer at the end of the exclusivity period without reasonable cause.

Why two stages? Because the LOI is about testing whether you and the seller are in the same ballpark. That shouldn't cost you anything. The exclusivity agreement is about committing real money to lawyers and accountants — and the break fee ensures the seller has skin in the game too. I've seen too many buyers drop $15K–$20K on due diligence only for the seller to take a competing offer or change their mind. The break fee fixes that.

Three things to get right

1. Move quickly on the LOI. The LOI is a ballpark — don't overthink it. Get it in front of the seller fast, before someone else does. You have 30 days to refine the number.

2. No deposit at LOI stage. Deposits are unnecessary if you structure the deal properly with a separate exclusivity agreement. They're a hassle to get back if the deal falls over, and they give you no additional protection that a well-drafted exclusivity agreement doesn't already provide.

3. Protect your DD costs with a break fee. When you move to exclusivity and start spending real money on accountants and lawyers, the break fee (typically $30K–$50K) ensures the seller can't waste your time and money. It's not punitive — it covers your actual third-party costs.

For a full breakdown of how to negotiate an LOI and what each clause means in practice, read the companion guide on negotiating an LOI when buying a business.

Once the LOI is signed and you move into due diligence, you'll need a structured process — the free due diligence checklist covers all the categories a buyer should work through. And for the end-to-end process of buying a small business in Australia, that guide covers what comes before and after this stage.

This template maps to Module 7 of the Playbook — Negotiation and Closing — which covers the full sequence from LOI through to settlement day.

The template below gives you every standard clause in plain English, with notes on what's negotiable, what's typically binding, and how to fill in each section for an Australian business acquisition.

Letter of Intent Template — Buying a Business in Australia

Notes on use: This template is a starting point, not a substitute for legal advice. For transactions above $500,000, or where a share sale structure is involved, have a solicitor review the final document before you send it. That said, the clauses below reflect what's standard in Australian SME acquisitions — there's nothing exotic here.

LOI TEMPLATE

LETTER OF INTENT — PROPOSED ACQUISITION OF [BUSINESS NAME]

Date: [Insert date]

From (Buyer): Name: _________________________________ Entity (if applicable): _________________________________ ABN: _________________________________ Address: _________________________________ Email: _________________________________

To (Seller): Name: _________________________________ Entity (if applicable): _________________________________ ABN: _________________________________ Address: _________________________________

Dear [Seller's first name],

Thank you for taking the time to meet with me and share the details of [Business Name]. I've been impressed by what you've built — [insert 1–2 specific things you genuinely admire about the business, e.g. "the quality of your team and the long-standing relationships you've developed with your commercial clients" or "the reputation you've earned in the local market over the past fifteen years"].

I'm writing to express my serious interest in acquiring the business. By way of background, [insert 2–3 sentences about yourself and why this business appeals to you — e.g. "I've spent the past twenty years in corporate finance and am now looking to acquire and operate a business in the trades sector. Your business stands out because of its strong recurring revenue base and the quality of your staff"].

I'd like to put forward an indicative offer for your consideration. The terms below are intended as a starting point for discussion — not a final position. My goal is to find an outcome that works well for both of us, including making sure there's a smooth transition for your staff and customers.

1. Purpose

This letter of intent sets out the proposed terms on which I intend to acquire the business known as [Business Name] ("the Business"), subject to the conditions set out below.

Note: This letter records our mutual intent — it is not a binding agreement to buy or sell the Business except where expressly stated.

2. Description of the Business

Business name: _________________________________

Business address: _________________________________

Nature of business: _________________________________

ABN of business: _________________________________

Relevant licences held: _________________________________ (for trades businesses: include contractor licence numbers, e.g. Queensland Building and Construction Commission licence, NSW Fair Trading licence, etc.)

3. Proposed Purchase Price and Structure

Total purchase price: $___________ (AUD), exclusive of GST

Sale structure:

Asset sale (recommended for most SME acquisitions — buyer purchases specified assets and goodwill, not the company entity)
Share sale (buyer purchases shares in the operating company — carries more risk, requires different due diligence)

Note: Asset sales are the standard structure for small business acquisitions in Australia under ~$5M. Share sales are sometimes requested by sellers for tax reasons — if the seller insists on a share sale, get advice on what liabilities you may be assuming.

What is included in the purchase price:

Goodwill and intellectual property (business name, customer list, website, phone numbers)
Plant and equipment (as listed in the asset schedule to be agreed)
Motor vehicles (as listed)
Customer contracts (if assignable)
Staff entitlements — to be managed as follows: [ ] Seller pays out all entitlements pre-settlement / [ ] Buyer assumes entitlements with purchase price adjustment

What is excluded from the purchase price:

Stock on hand — to be purchased separately at cost, valued at settlement (estimated: $___________)
Cash in the business
Debtors and creditors (to be retained by seller unless otherwise agreed)
Any assets specifically identified as excluded in Annexure A

Working capital adjustment: The parties agree that a working capital adjustment mechanism will be agreed and included in the formal Sale and Purchase Agreement ("SPA").

4. Offer Finalisation Period

The Buyer will have 30 calendar days from the date of this letter to finalise a formal offer, based on preliminary review of the following:

Review of financial statements for the past 3 years (profit and loss, balance sheet, tax returns)
Verification of revenue, margins, and EBITDA as represented by the Seller
High-level review of customer and supplier contracts
Preliminary inspection of plant, equipment, and vehicles
Assessment of staff structure and key person dependencies
Review of all licences, permits, and compliance obligations relevant to the business

During this 30-day period, the Buyer will refine the indicative price into a formal offer. If both parties agree on the formal offer, the parties will enter into a separate Exclusivity Agreement (see below) to allow full confirmatory due diligence.

The Buyer may, in its absolute discretion, withdraw this letter of intent at any time during the 30-day period by written notice to the Seller.

Seller obligations during this period: The Seller agrees to provide the Buyer with reasonable access to financial records and key business information to allow the Buyer to refine the offer. The Seller will not take any action during this period that would materially alter the business without the Buyer's consent.

5. Finance Condition

The Buyer's obligation to proceed to settlement is conditional upon the Buyer obtaining finance approval on terms satisfactory to the Buyer.

Finance condition period: ____ calendar days from the date of this letter (Allow at least 21–28 days for bank finance; if using vendor finance, this clause may be simplified or removed — see the vendor finance guide)

Finance amount sought: $___________ from [ ] bank / [ ] vendor / [ ] other: ___________

If the Buyer cannot obtain finance approval within this period, the Buyer may terminate this letter by written notice to the Seller.

6. Exclusivity

No exclusivity is granted under this letter of intent. The Seller is free to continue discussions with other interested parties during the 30-day offer finalisation period.

If both parties agree on a formal offer at the end of this period, the parties will enter into a separate Exclusivity Agreement granting the Buyer a 60-day exclusive period for confirmatory due diligence, with a break fee to protect the Buyer's third-party costs. The template for that agreement is included below.

Note: Not requesting exclusivity at LOI stage keeps things simple and low-friction. The seller doesn't feel locked in, you don't feel pressured by a ticking clock, and nobody has put money on the table yet. The real commitment — and the real protection — comes with the Exclusivity Agreement once you've confirmed you're in the right ballpark.

7. Confidentiality

Both parties agree to keep the terms of this letter of intent, and all information exchanged during the due diligence process, strictly confidential. Neither party will disclose the proposed transaction to staff, customers, suppliers, or competitors without the prior written consent of the other party, except as required by law or to their professional advisers (solicitor, accountant, bank) on a need-to-know basis.

(This clause IS binding.)

8. Key Commercial Terms (to be confirmed in SPA)

The following terms are agreed in principle and will be formalised in the Sale and Purchase Agreement:

Vendor transition period: The Seller agrees to remain available to assist the Buyer for a transition period of ____ weeks following settlement, at no additional cost, to facilitate the handover of customers, staff, suppliers, and operational knowledge.

(For trades businesses, specify what training and introductions will be provided — particularly with key customers or regulatory contacts)

Staff: The Seller represents that all current employees of the Business will be offered employment by the Buyer on equivalent terms at settlement. The Seller will manage all staff communications regarding the sale in a manner agreed with the Buyer prior to announcement.

Premises lease: The current premises lease at [address] expires on [date]. The Seller will use best endeavours to obtain the landlord's consent to an assignment of the lease (or to a new lease on equivalent terms) prior to settlement. If landlord consent cannot be obtained on terms acceptable to the Buyer, the Buyer may terminate this letter without penalty.

Restraint of trade: The Seller agrees not to engage in any business that is in direct competition with the Business within [radius] km of [location] for a period of [____ years] following settlement.

(2–3 years and 50km is typical for a service area business; adjust based on the geography of the customer base)

Warranties: The Seller warrants that:

The financial information provided is accurate and complete in all material respects
The Business has no outstanding litigation, ATO debt, or regulatory non-compliance not disclosed to the Buyer
All licences, permits, and registrations required to operate the Business are current and transferable
No key staff have given or received notice of termination
The Seller has authority to sell the Business and its assets

9. Settlement

Proposed settlement date: ___________ (or as otherwise agreed following completion of conditions)

Settlement location: Solicitors' offices / electronic settlement via PEXA (if applicable)

At settlement, the Seller will deliver all keys, passwords, login credentials, equipment, vehicles, customer records, and other assets as agreed. The Buyer will pay the purchase price by electronic funds transfer.

10. Broker Fees

The Seller confirms that any business broker fees are payable by the Seller from the proceeds of sale. The Buyer is not liable for any broker commission or introduction fee.

(Confirm this before signing — some brokers attempt to charge buyers a "buyer's fee" in certain transaction types)

11. Non-Binding Nature of This Letter

Except for clause 7 (Confidentiality), this letter of intent is not legally binding. It records the intention of the parties to proceed towards a formal offer and, if agreed, a separate Exclusivity Agreement and Sale and Purchase Agreement on the terms described above.

12. Governing Law

This letter of intent is governed by the laws of the State of [__________] (insert relevant state: NSW / VIC / QLD / WA / SA / other).

13. Signature

Signature: _________________________________

Full name: _________________________________

Date: _________________________________

On behalf of (entity): _________________________________

Note: The LOI is signed by the buyer only. It's your statement of intent — the seller doesn't need to countersign. If they're comfortable with the ballpark, you move to the Exclusivity Agreement, which both parties sign.

Template Notes — How to Use This

Before you send it: Personalise the opening letter. Sellers are people — they've built something over years and they want to know it's going to someone who respects that. A generic template with blank fields signals that you're tyre-kicking. Two sentences about what specifically impressed you goes a long way.

After you send it: Expect the seller (or their broker) to ask about exclusivity and deposit. Explain the two-stage approach — most sellers are comfortable with it once they understand that the exclusivity agreement (with a break fee protecting them too) comes after they've accepted the ballpark. It's a more honest structure than locking everyone in before either party knows if the deal is real.

Asset schedule: The SPA will include a detailed schedule of assets. Start building this list during the 30-day offer finalisation period — every vehicle, machine, and piece of equipment with an estimated value.

What comes next: Once the seller accepts your ballpark and you sign the Exclusivity Agreement, begin full due diligence immediately. Use the due diligence checklist to structure your process — don't start with the financials just because they're easiest. Work through all categories in parallel.

The full negotiation and closing sequence — from LOI through SPA through settlement — is covered in Module 7 of the Playbook.

Letter of Intent Template: Buying a Business in Australia (Free Download)

The Two-Stage Process (And Why It Works)

Get the free LOI template