A step-by-step LOI guide built for associate dentists, DSOs, and private buyers acquiring general or specialty dental practices — covering purchase price, active patient protections, seller transition terms, and payer mix contingencies.
A Letter of Intent (LOI) is the critical first document in any dental practice acquisition. It establishes the proposed purchase price, deal structure, due diligence timeline, and key conditions before attorneys draft the formal Asset Purchase Agreement. For dental practice buyers — whether an associate dentist using SBA 7(a) financing or a DSO executing a tuck-in acquisition — a well-structured LOI signals seriousness, protects your interests during exclusivity, and sets the negotiating framework for every major term that follows. Dental practice LOIs carry unique considerations that generic business LOIs miss entirely: active patient count thresholds, hygiene recall compliance rates, payer mix representations, equipment condition disclosures, and seller transition employment structures are all material to practice value and must be addressed upfront. A vague LOI leads to renegotiation, deal fatigue, and broken transactions. This guide walks through every section of a dental practice LOI with example language, negotiation notes, and the key terms most likely to create friction between buyers and sellers in the $500K–$3M collections market.
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Identifies the buyer entity, the selling dentist or entity, and the specific dental practice being acquired — including the legal name, DBA, practice address, and NPI number. For asset purchases, the buyer is typically a newly formed professional corporation or LLC structured to comply with state dental board ownership requirements.
Example Language
This Letter of Intent ('LOI') is entered into as of [Date] between [Buyer Name], a [State] professional corporation ('Buyer'), and [Seller Name], DDS/DMD, individually and as owner of [Practice Legal Name] d/b/a [Practice DBA], located at [Practice Address], NPI #[XXXXXXXXXX] ('Practice'). This LOI sets forth the non-binding terms under which Buyer proposes to acquire substantially all assets of the Practice as further described herein.
💡 Confirm the correct legal entity selling the assets — many practices operate under a professional corporation or PLLC separate from the dentist individually. Also confirm state dental board rules on buyer entity structure early; some states prohibit non-dentist ownership entirely, which affects DSO deal structures and requires a Management Services Agreement overlay. Identify any co-owners or silent partners before the LOI is signed.
Proposed Purchase Price and Valuation Basis
States the proposed total purchase price, the valuation methodology used to arrive at it, and any adjustments tied to collections, EBITDA, or active patient count at closing. Dental practices in the lower middle market typically trade at 3.5x–6.5x adjusted EBITDA or 60–90% of trailing twelve-month collections.
Example Language
Buyer proposes a total purchase price of $[X,XXX,000] ('Purchase Price'), representing approximately [X.Xx] times the Practice's trailing twelve-month adjusted EBITDA of $[XXX,000] as reflected in the Practice's 2023 profit and loss statement and production/collections reports. The Purchase Price is subject to adjustment at closing if trailing twelve-month collections fall below $[XXX,000] or if active patient count (patients seen within 18 months of closing) is fewer than [1,000] patients, in which case the Purchase Price shall be reduced on a pro-rata basis as agreed by the parties.
💡 Sellers will push back hard on any post-LOI purchase price reduction mechanism. Negotiate the active patient threshold and collections floor carefully — these are the two most common post-due-diligence renegotiation triggers. DSO buyers often anchor to EBITDA multiples while individual buyers using SBA financing are constrained by appraised value, which the SBA lender will independently verify. Ensure the valuation basis is clearly defined (trailing twelve months vs. weighted average of three years) to avoid disputes when production reports are pulled.
Deal Structure and Asset Allocation
Specifies whether the transaction is structured as an asset purchase or stock purchase, identifies the key asset categories being acquired, and provides a preliminary allocation framework. Nearly all dental practice acquisitions are structured as asset purchases to allow the buyer to step up the tax basis of goodwill and equipment.
Example Language
The transaction shall be structured as an asset purchase, with Buyer acquiring all tangible and intangible assets of the Practice, including but not limited to: (i) patient records and charts for approximately [X,XXX] active patients; (ii) all dental equipment, instruments, and technology listed in Exhibit A; (iii) the Practice's trade name, phone numbers, website, and social media accounts; (iv) all vendor and supplier contracts assignable by Seller; and (v) the leasehold interest in the premises located at [Address]. The parties agree to allocate the Purchase Price among asset classes in accordance with IRS Form 8594 requirements, with the majority of value allocated to patient goodwill and going-concern value. Stock of any professional entity is expressly excluded from this transaction.
💡 Patient records are the most valuable asset in a dental practice acquisition — ensure the LOI explicitly includes all patient charts, digital records, and imaging files (Panorex, CBCT, intraoral photos) stored in the practice management software (Dentrix, Eaglesoft, Open Dental, etc.). Confirm data format portability if a software migration is planned. Sellers sometimes attempt to exclude certain equipment under personal property claims — require a full equipment list as an exhibit to the LOI to prevent post-signing disputes.
Financing Contingency
Discloses the buyer's intended financing method and makes the LOI contingent on financing approval within a defined period. SBA 7(a) loans are the most common financing vehicle for individual dentist buyers, covering up to 90% of the purchase price with the seller carrying 10% on standby.
Example Language
Buyer intends to finance the acquisition through an SBA 7(a) loan from [Lender Name or 'an SBA-approved lender'] in an amount not to exceed $[X,XXX,000], with the remaining balance funded through Buyer's equity contribution of approximately $[XXX,000] (10% of Purchase Price). This LOI is contingent upon Buyer receiving a written SBA loan commitment on terms acceptable to Buyer within [45] days of the execution of this LOI. Seller agrees to cooperate with lender's underwriting process, including providing three years of tax returns, production/collections reports, and completion of an SBA business valuation by a qualified third-party appraiser.
💡 SBA lenders will require their own third-party practice valuation, which may differ from the agreed purchase price — discuss this risk with the seller upfront so it does not feel like a renegotiation later. If the seller is requiring a seller carry note as a condition of sale, confirm early whether the SBA lender will require the seller note to be on full standby (no payments for 24 months), as many sellers find this unacceptable. DSO buyers typically waive financing contingencies entirely, which is a significant competitive advantage over individual SBA buyers.
Due Diligence Period and Access
Establishes the length of the due diligence period, the specific documents and data the seller must provide, and the confidentiality obligations governing all information exchanged. Dental practice due diligence typically requires 30–60 days and involves both financial and clinical/operational review.
Example Language
Seller shall grant Buyer and Buyer's advisors exclusive access to the Practice's financial, operational, and clinical records for a due diligence period of [45] days following full execution of this LOI ('Due Diligence Period'). Seller shall provide within [10] business days of LOI execution: (i) three years of profit and loss statements and federal tax returns; (ii) trailing 24-month production and collections reports by provider and procedure code from the Practice's practice management software; (iii) a current active patient count report (patients seen within 18 months); (iv) hygiene recall compliance rate and reappointment percentage; (v) payer mix breakdown by insurance plan with current fee schedules and reimbursement rates; (vi) all equipment with age and service history; (vii) staff roster with compensation, tenure, and employment agreements; and (viii) current lease agreement and any amendments. All information provided shall be subject to the Confidentiality Agreement executed by the parties on [Date].
💡 Push for the production-by-provider report as a non-negotiable item — this is the only way to accurately assess key-person dependency and understand what percentage of collections is attributable to the selling dentist versus associates or hygienists. Many sellers are reluctant to provide detailed insurance fee schedules, but this data is essential for assessing payer mix quality and reimbursement rate sustainability. If the practice uses Medicaid or managed care contracts, request the actual reimbursement rates for the top 20 procedure codes — not just aggregate payer percentages.
Exclusivity Period
Grants the buyer an exclusive negotiating window during which the seller agrees not to market the practice, accept other offers, or engage with competing buyers. Exclusivity is essential to justify the buyer's investment of time and legal fees in due diligence.
Example Language
In consideration of Buyer's commitment to conduct due diligence and incur costs in connection with this proposed acquisition, Seller agrees that for a period of [60] days following full execution of this LOI ('Exclusivity Period'), Seller shall not, directly or indirectly, solicit, negotiate, or accept any offer from any third party for the sale, merger, affiliation, or transfer of the Practice or its material assets. The Exclusivity Period shall automatically extend for an additional [15] days if the parties are actively negotiating the terms of a definitive Asset Purchase Agreement at the expiration of the initial period.
💡 Sellers — particularly those being courted by multiple DSOs — will try to limit exclusivity to 30 days or refuse it entirely. An exclusivity period of 45–60 days is standard for SBA-financed deals given the lender underwriting timeline. DSO buyers often negotiate shorter exclusivity windows (30 days) given their faster execution capability. If the seller resists exclusivity, consider offering a small non-refundable exclusivity deposit ($5,000–$15,000) to align incentives — this amount is typically credited toward the purchase price at closing.
Seller Transition and Employment Terms
Outlines the selling dentist's post-closing role, compensation structure, duration of transition employment, and the scope of their clinical and patient relationship transition obligations. Transition terms are among the most negotiated provisions in any dental practice LOI.
Example Language
As a material condition of closing, Seller agrees to enter into a Transition Employment Agreement with Buyer for a period of [12] months following the closing date ('Transition Period'), during which Seller shall: (i) continue clinical production at not less than [3] days per week; (ii) actively introduce Buyer to the Practice's patient base through written communications, chair-side introductions, and co-treatment where appropriate; (iii) support staff retention and operational continuity; and (iv) cooperate with insurance credentialing and payer re-credentialing processes. Seller's compensation during the Transition Period shall be [30]% of Seller's personal production collections, with a minimum guaranteed amount of $[X,XXX] per month. Following the Transition Period, Buyer shall have the option to extend Seller's engagement on mutually agreeable terms.
💡 The length and compensation structure of the seller transition is one of the highest-stakes terms in a dental LOI. Sellers approaching retirement want maximum flexibility and a clear end date; buyers and SBA lenders need sufficient transition coverage to protect against patient attrition. A 12-month transition with 3 days per week is a reasonable starting framework. Avoid percentage-of-production compensation structures that create seller incentive to cherry-pick high-value cases and reduce referrals to the buyer. Consider capping the seller's discretion to refer out specialty work during the transition period.
Non-Compete and Non-Solicitation
Defines the geographic radius, duration, and scope of the seller's covenant not to compete and not to solicit patients or staff following the closing. Non-compete enforceability varies significantly by state and is particularly important in dental acquisitions given the personal nature of patient relationships.
Example Language
As a condition of closing, Seller shall execute a Non-Competition and Non-Solicitation Agreement providing that for a period of [3] years following the end of the Transition Period, Seller shall not: (i) engage in the practice of general or [specialty] dentistry within a [5]-mile radius of the Practice's primary location at [Address]; (ii) solicit or treat any patient of the Practice who was seen within the 24 months preceding the closing date; or (iii) solicit, recruit, or hire any employee or contractor of the Practice. The geographic scope and duration shall be subject to applicable state law, and the parties agree to seek legal counsel to ensure enforceability in [State].
💡 Non-compete enforceability is highly state-specific — California, North Dakota, and Minnesota have near-total bans on non-competes, while most other states enforce reasonable restrictions. In dental, the non-compete is one of the most valuable protections a buyer has, because the selling dentist's personal relationship with patients is the primary attrition risk. A 3-year, 5-mile restriction is standard; buyers should push for 5 years in rural markets where geographic alternatives are limited. Sellers nearing retirement are often less resistant to non-competes, while younger sellers or those with active associate practices will negotiate harder on scope.
Lease Assignment or New Lease
Addresses the disposition of the existing office lease, including the requirement to obtain landlord consent to assignment, the negotiation of lease renewal options, and the buyer's right to terminate the LOI if acceptable lease terms cannot be secured.
Example Language
Seller represents that the Practice operates under a lease agreement dated [Date] with a remaining term of [X] years and [X] renewal options of [X] years each. As a condition of closing, Seller shall obtain written consent from the landlord to assign the existing lease to Buyer on substantially the same terms, or Buyer shall negotiate a new lease directly with the landlord with a minimum initial term of [5] years and at least one [5]-year renewal option. If Buyer is unable to secure an assignable or new lease on terms acceptable to Buyer within [30] days of the expiration of the Due Diligence Period, Buyer may terminate this LOI and receive a full refund of any deposit paid, with no further obligations to either party.
💡 Lease assignment is one of the most commonly overlooked LOI provisions and one of the most frequent deal-killers. Many commercial landlords use the assignment request as leverage to renegotiate rent to market rates or demand a personal guarantee from the buyer. Confirm the remaining lease term before agreeing to a purchase price — a practice with only 2 years left on its lease and an uncooperative landlord carries significant risk. SBA lenders require a minimum lease term equal to the loan term (typically 10 years including options), so lease adequacy is a financing prerequisite, not just a business preference.
Deposit and Closing Timeline
Specifies the amount of the good faith deposit, the conditions under which it is refundable, and the target closing date. A clearly defined deposit structure demonstrates buyer seriousness while protecting the buyer's capital if material due diligence findings or financing failure occur.
Example Language
Upon full execution of this LOI, Buyer shall deposit $[XX,000] ('Good Faith Deposit') into an escrow account held by [Escrow Agent/Attorney]. The Good Faith Deposit shall be fully refundable to Buyer if: (i) Buyer terminates the LOI during the Due Diligence Period based on material adverse findings; (ii) the parties fail to execute a definitive Asset Purchase Agreement within [30] days of the expiration of the Due Diligence Period; (iii) Buyer's SBA financing is denied; or (iv) the landlord fails to consent to lease assignment or a new lease on acceptable terms. The parties target a closing date of on or before [Date], subject to SBA loan approval, completion of insurance credentialing, and execution of all ancillary agreements.
💡 Good faith deposits for dental practice acquisitions typically range from $10,000 to $50,000 depending on practice size. Sellers represented by brokers will push for larger, partially non-refundable deposits to filter out unserious buyers — resist non-refundable deposits until the definitive APA is signed. The closing timeline should be realistic given SBA underwriting timelines (60–90 days from application to funding); agreeing to a 45-day close when SBA financing is involved sets up a failed transaction. Build in milestone checkpoints tied to lender commitments rather than calendar dates alone.
Active Patient Count Threshold and Purchase Price Adjustment
The number of active patients — typically defined as those seen within the trailing 18 months — is a direct driver of practice value and post-acquisition revenue. Negotiate a minimum active patient count guarantee (e.g., 1,000 patients) with a defined purchase price reduction mechanism if the verified count at closing falls below the represented figure. Sellers often quote total chart count rather than active patients, which can inflate perceived value by 30–50% in practices with poor recall programs.
Payer Mix Representations and Reimbursement Rate Disclosures
Payer mix quality — specifically the ratio of fee-for-service to PPO to Medicaid collections — is one of the most significant drivers of EBITDA margin and post-acquisition profitability. Require the seller to represent current payer mix percentages and provide actual reimbursement rates for the top 20 procedure codes from each major payer. Negotiate a covenant that no material insurance contract changes will occur between LOI signing and closing, and secure a termination right if any major PPO contract is cancelled or renegotiated at materially lower rates prior to close.
Seller Transition Length and Minimum Production Obligation
The risk of patient attrition following ownership transition is the buyer's single largest post-closing exposure. Negotiate a minimum production obligation during the transition period — not just a time commitment — so the seller cannot technically satisfy the agreement by showing up and referring all complex cases out. A production floor of 80% of the seller's trailing twelve-month average daily production provides meaningful protection. Tie a portion of any earnout or seller carry note to patient retention metrics measured at 6 and 12 months post-closing.
Insurance Credentialing Timing and Risk Allocation
New owner credentialing with PPO networks (Delta Dental, MetLife, Cigna, Aetna) can take 60–120 days and creates a billing gap risk if not managed properly. Negotiate clear responsibility for initiating credentialing applications pre-closing, and include a provision allowing the practice to bill under the selling dentist's NPI on a temporary basis under applicable state law and payer rules during the credentialing gap. Confirm which payers require new applications versus simple ownership-change notifications, and allocate the cost and administrative burden between buyer and seller explicitly.
Equipment Condition Representations and Capital Expenditure Reserve
Deferred capital expenditures — aging dental chairs, outdated digital X-ray sensors, malfunctioning sterilization equipment, or an obsolete panoramic unit — are among the most common post-closing surprises in dental acquisitions. Require a full equipment inventory as an LOI exhibit, with age and service history disclosed for all major items. Negotiate a seller representation that all equipment is in good working order as of closing, and establish a holdback or escrow reserve (typically $15,000–$50,000 depending on practice size) to cover undisclosed equipment failures discovered within 90 days of closing.
Non-Compete Geographic Scope and Duration
The selling dentist's ability to re-enter the local market post-transition is the buyer's primary competitive risk. Negotiate the non-compete radius based on actual patient drive times rather than standard mileage — a 3-mile radius in a dense urban market may be equivalent to a 10-mile radius in a suburban setting. For practices with a highly loyal patient base tied to the seller's personal relationships, consider extending the non-compete duration to 4–5 years or tying the end date to confirmed patient retention benchmarks rather than a fixed calendar period.
Staff Retention Commitments and Key Employee Notifications
Hygienist turnover in the first 90 days post-acquisition is one of the top drivers of revenue disruption, as hygiene production typically represents 25–35% of total practice collections and hygienists carry deeply personal patient relationships. Negotiate a seller commitment to maintain current staff compensation and employment terms through closing, prohibit the seller from discussing the sale with staff until a mutually agreed notification date, and include key employee retention bonuses funded jointly by buyer and seller to incentivize hygienists and the office manager to remain through the transition.
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Most LOI provisions are explicitly non-binding, meaning either party can walk away before a definitive Asset Purchase Agreement is signed. However, two provisions are typically drafted as binding: the exclusivity clause (preventing the seller from shopping the deal to other buyers during the due diligence period) and the confidentiality obligation (protecting all practice financial and patient data exchanged during due diligence). The good faith deposit mechanics may also be partially binding depending on how refundability conditions are written. Always have a dental or healthcare M&A attorney review your LOI before execution — a poorly drafted LOI can inadvertently create binding obligations or, more commonly, leave critical terms so vague that the definitive APA becomes a full renegotiation.
Dental practices in the lower middle market typically trade at 3.5x–6.5x adjusted EBITDA, or roughly 60–90% of trailing twelve-month collections. Fee-for-service or PPO-heavy practices with 1,000+ active patients, strong hygiene recall programs, multiple producers, and modern equipment command the higher end of that range. Medicaid-dependent practices, sole-producer models, or offices with deferred equipment maintenance trade at the lower end or below it. For SBA-financed individual buyers, the purchase price is also constrained by the SBA lender's independent appraisal — build in a 5–10% buffer between your LOI price and the appraised value floor to avoid a financing shortfall at closing.
A 12-month transition with the selling dentist working a minimum of 3 days per week is the most common structure in individual dentist acquisitions, and it aligns with SBA lender requirements for key-person transition adequacy. DSO acquisitions often negotiate longer transitions (18–24 months) tied to earnout production targets. The critical variable is not duration but the seller's minimum production and patient introduction obligations during the transition — a seller who shows up twice a week but stops doing complex restorative work and avoids new patient introductions provides far less value than a motivated seller committed to 12 months at full production. Tie at least a portion of the seller carry note or any earnout to verified patient retention at 6 and 12 months post-closing.
Nearly all dental practice acquisitions are structured as asset purchases, for several important reasons. Asset purchases allow the buyer to step up the tax basis of goodwill and equipment to the purchase price, generating significant amortization and depreciation deductions post-closing. They also insulate the buyer from inheriting undisclosed liabilities of the seller's professional corporation, including malpractice claims, employment disputes, or tax liabilities. SBA lenders strongly prefer asset purchases. Stock purchases are occasionally used in DSO partial-equity transactions or when payer contract transferability issues make an asset structure impractical, but they carry substantially higher buyer risk and require extensive representations and warranties from the seller to be acceptable.
If the SBA-required third-party practice valuation comes in below the LOI purchase price, the SBA lender will limit the loan amount to the appraised value — creating a financing gap the buyer must fill with additional equity or negotiate the seller to fill with an increased seller carry note. This is one of the most common deal disruptions in SBA dental acquisitions. To reduce this risk: anchor your LOI price to verifiable EBITDA multiples within the 3.5x–6.5x range rather than aggressive broker asking prices, discuss the appraisal process with your SBA lender before submitting the LOI, and include a LOI provision allowing renegotiation or termination if the appraised value falls more than [10%] below the agreed price — framing it as a shared risk rather than a buyer-only escape hatch will make sellers more receptive.
Patient attrition is the primary post-closing risk in any dental acquisition, and the LOI is your first opportunity to build in structural protections. Negotiate a minimum active patient count guarantee with a purchase price adjustment mechanism. Require specific seller transition obligations including chair-side patient introductions for the first 6 months. Structure a portion of the seller carry note (typically 15–20%) as a retention holdback released only if active patient count remains above a defined threshold at 12 months post-closing. Work with the seller to draft a patient notification letter that emphasizes continuity and the seller's endorsement of the new owner. Retain the existing phone number, website URL, and branding for at least 12 months post-closing to maintain patient recognition and reduce confusion during the transition.
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