A deal-ready LOI framework built for IVF practice acquisitions — covering MSO structures, physician retention earnouts, SART representations, and corporate practice of medicine compliance across every key section.
Acquiring a fertility clinic is one of the most structurally complex transactions in lower middle market healthcare M&A. The letter of intent (LOI) is not a formality — it is the document that establishes the economic and structural framework for everything that follows, including how the physician-owner transitions, how the MSO and professional entity are organized, and how earnout milestones tied to IVF cycle volume will be measured. Because fertility clinics operate under state corporate practice of medicine (CPOM) laws, the LOI must carefully separate the management services agreement from the clinical professional entity from day one. A buyer who submits a generic healthcare LOI risks creating legal ambiguity, losing the seller's confidence, or establishing precedents in exclusivity that favor the seller during diligence. This guide walks through each LOI section with fertility clinic-specific language, explains what is negotiable versus standard, and highlights the mistakes that derail IVF practice acquisitions before the purchase agreement is ever drafted.
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Identifies the buyer entity, the seller's professional corporation or LLC, and explicitly describes whether the transaction is structured as an asset purchase, equity recapitalization, or MSO platform acquisition. For fertility clinics, this section must distinguish between the management services organization (the acquirable entity) and the physician-owned professional entity (the PC or PLLC that holds the medical license and employment relationships with reproductive endocrinologists), which remains nominally physician-owned under CPOM law.
Example Language
This Letter of Intent is entered into between [Buyer Entity], a Delaware limited liability company ('Buyer'), and [Seller PC Name], a [State] professional corporation ('Seller PC'), and [Seller MSO Name], a [State] limited liability company ('Seller MSO'), collectively referred to herein as 'Seller.' The proposed transaction contemplates Buyer's acquisition of 100% of the membership interests of Seller MSO and entry into a long-term Management Services Agreement between Buyer's designated management entity and Seller PC, pursuant to which Seller PC will retain all clinical decision-making authority in compliance with [State] corporate practice of medicine statutes. The MSO transaction is expected to be structured as a purchase of equity interests, while the PC will remain physician-owned and governed pursuant to a Physician Shareholder Agreement to be negotiated concurrently.
💡 The seller's attorney will scrutinize whether the LOI accurately reflects CPOM requirements in their specific state. California, Texas, and New York each have materially different CPOM rules. Confirm which entity is being purchased versus which is being governed by a management agreement. Buyers should avoid LOI language that implies ownership or control of the professional entity, as this creates regulatory exposure that can unwind the deal in diligence or post-close.
Purchase Price and Valuation Basis
States the proposed total enterprise value, the implied EBITDA multiple, and how the purchase price was derived. For fertility clinics, the valuation basis should reference normalized EBITDA after physician compensation adjustment, add-backs for one-time laboratory capital expenditures, and any adjustments for below-market or above-market payer contracts. Typical valuation multiples for SART-member IVF clinics with in-house laboratories range from 5x to 9x normalized EBITDA depending on physician dependency, success rate benchmarks, and revenue diversification.
Example Language
Buyer proposes a total enterprise value of approximately $[X] million, representing a multiple of approximately [6.5x–7.5x] trailing twelve-month normalized EBITDA of $[X] million as reflected in the Quality of Earnings report prepared by [QoE Firm] dated [Date]. Normalized EBITDA reflects add-backs for excess founding physician compensation above a market replacement rate of $[X] per year, one-time IVF laboratory equipment purchases of $[X] totaling $[X], and non-recurring legal expenses of $[X]. The purchase price is subject to a customary working capital adjustment at close based on a target net working capital of $[X], to be determined based on a trailing 12-month average. Purchase price excludes any embryo storage liabilities or pending patient refund obligations, which shall be assumed or discharged by Seller prior to close.
💡 Sellers frequently challenge the buyer's market replacement rate for physician compensation — this is the most common valuation dispute in fertility clinic deals. A founding RE earning $800K annually in a two-physician practice will argue for a higher replacement rate than the buyer assumes. Negotiate the physician compensation normalization methodology before signing the LOI, not after. Also confirm whether embryo storage liabilities, patient prepayments for future IVF cycles, and any pending refund obligations are excluded from or included in working capital.
Deal Structure and Consideration
Breaks down how the total purchase price is paid, including cash at close, any seller-financed note, rollover equity offered to the founding physician, and earnout provisions tied to post-close performance. Fertility clinic deals almost universally include a physician rollover equity or earnout component to align the founding RE's incentives during the transition period, which is typically 2 to 5 years given patient relationship dependency.
Example Language
The total consideration of $[X] million shall be payable as follows: (i) $[X] million in cash at close, funded through Buyer's equity capital and senior debt facility; (ii) a seller note of $[X] million bearing interest at [6]% per annum, payable over [24] months, subordinated to Buyer's senior lender, and subject to offset for indemnifiable losses exceeding the deductible; and (iii) rollover equity representing [25]% of the post-close MSO entity, valued at $[X] million at close, subject to a shareholders' agreement governing liquidity rights, transfer restrictions, and drag-along provisions. In addition, Seller shall be eligible to earn up to $[X] million in contingent earnout consideration over [36] months, payable in two tranches: (a) $[X] million if normalized EBITDA exceeds $[X] for the 12-month period ending [Date]; and (b) $[X] million if cumulative IVF cycle volume exceeds [X] cycles in months 13 through 36 post-close.
💡 Founding physicians frequently underestimate the risk of earnout provisions tied to EBITDA rather than revenue or cycle volume. Post-close EBITDA is heavily influenced by buyer's management fees, debt service allocated to the platform, and overhead allocation — all of which the seller cannot control. Negotiate earnout metrics that are physician-controllable: IVF cycle starts, egg retrieval volume, or gross collections from the clinic are preferable seller metrics. Buyers should insist on a cure period and require the seller-physician to remain employed through each earnout measurement date.
Exclusivity and No-Shop Period
Grants the buyer an exclusive negotiating period during which the seller agrees not to solicit, entertain, or negotiate with other potential acquirers. In fertility clinic transactions, exclusivity periods of 60 to 90 days are standard given the complexity of MSO structuring, SART data diligence, and regulatory review. Sellers should resist overly broad no-shop clauses that prevent them from responding to inbound interest or that survive a material breach by the buyer.
Example Language
In consideration of Buyer's commitment to dedicate substantial resources to due diligence and transaction structuring, Seller agrees to a 75-day exclusive negotiating period commencing upon both parties' execution of this LOI ('Exclusivity Period'). During the Exclusivity Period, Seller shall not, and shall cause its officers, directors, shareholders, agents, and advisors not to, directly or indirectly solicit, initiate, encourage, or participate in any discussions or negotiations with any third party regarding a sale, merger, recapitalization, or other change of control transaction involving the Clinic, the MSO, or the Seller PC. Buyer may extend the Exclusivity Period by an additional 15 days with written notice if due diligence is substantially complete and Buyer is actively negotiating the Definitive Agreement in good faith.
💡 Sellers should push for a shorter exclusivity window — 45 to 60 days — unless the buyer is demonstrably capitalized and diligence is already underway. Include a provision that exclusivity terminates automatically if the buyer fails to deliver a revised LOI or draft purchase agreement within the first 30 days. Fertility clinic diligence can stall on SART data interpretation or CLIA audit results; build in a mutual good-faith extension mechanism rather than automatic termination.
Due Diligence Scope and Access
Outlines the categories of information the buyer will require access to during the diligence period and the seller's obligations to facilitate access to personnel, records, and facilities. For fertility clinics, this section should specifically enumerate physician employment agreements, CDC ART success rate reports, CLIA certification documents, and HIPAA compliance records as required diligence items, as each carries material deal risk.
Example Language
During the Exclusivity Period, Seller shall provide Buyer and its advisors with reasonable access to the following materials and personnel for purposes of confirmatory due diligence: (i) physician employment agreements, non-compete provisions, and any pending renegotiation correspondence for all reproductive endocrinologists; (ii) the Clinic's last three years of CDC ART outcome data submitted to SART, including any adverse reports, data corrections, or voluntary non-participation periods; (iii) current CLIA certificate, CAP accreditation documentation, and laboratory director employment status; (iv) all payer contracts, fertility benefit administrator agreements (including any Progyny, WINFertility, or employer direct contracts), and any pending renegotiations or termination notices; (v) HIPAA compliance documentation, business associate agreements, patient consent forms including embryo disposition agreements, and any known or threatened patient data breach incidents; and (vi) malpractice claims history for the last five years, tail coverage obligations, and current liability insurance certificates. Seller shall designate a primary diligence contact and provide access to the Clinic's electronic health records system for aggregate data review under a mutually agreed data access protocol.
💡 Sellers should insist that all diligence access be governed by a signed confidentiality agreement before any physician employment agreements or payer contracts are shared. EHR access for aggregate data review should be structured to avoid any transmission of individually identifiable patient information. Buyers should flag early if the CLIA certificate is held in the physician's name rather than the entity — this is a common structural issue in small practices that can complicate an asset purchase.
Conditions to Closing
Lists the material conditions that must be satisfied before the transaction closes, including regulatory approvals, physician employment agreement execution, third-party consents, and representations remaining true. Fertility clinic closings frequently require consent from payer networks, fertility benefit platforms, and state health departments, each of which can introduce delay.
Example Language
The obligation of Buyer to consummate the proposed transaction is conditioned upon, among other things: (i) completion of due diligence to Buyer's reasonable satisfaction, including confirmation of SART membership in good standing and no pending adverse CDC ART outcome determinations; (ii) execution of a Physician Employment Agreement and Management Services Agreement between Buyer's designated MSO entity and the Seller PC and its reproductive endocrinologists, on terms acceptable to Buyer; (iii) receipt of all required third-party consents, including consent from the Clinic's senior lender, major payer networks, and any fertility benefit platform agreements that contain change-of-control provisions; (iv) confirmation that all CLIA, state health department, and CAP accreditations are current, transferable, and not subject to any outstanding corrective action plans; and (v) no material adverse change in the Clinic's IVF cycle volume, EBITDA, or physician staffing between the LOI date and closing.
💡 The material adverse change (MAC) clause is particularly consequential in fertility clinic deals where patient volume can fluctuate significantly due to a single physician departure or a negative press event tied to SART outcomes. Define MAC narrowly and specifically — avoid broad industry-wide carveouts that leave the buyer exposed to general healthcare regulatory changes. Sellers should negotiate that a MAC is triggered only by a defined percentage decline in cycle volume or EBITDA, not by speculative market conditions.
Representations and Covenants
Summarizes the key representations the seller makes regarding the accuracy of financial statements, regulatory compliance, physician licensure, and absence of undisclosed liabilities, and the operational covenants the seller agrees to during the period between LOI and close. For fertility clinics, this section should address SART data accuracy, physician licensing status, and embryo storage agreement completeness as specific representations.
Example Language
Seller represents and warrants, as of the date of this LOI and as of the closing date, that: (i) the financial statements provided to Buyer fairly present the Clinic's revenue, EBITDA, and working capital in all material respects and have been prepared in accordance with GAAP or consistent accounting principles applied on a consistent basis; (ii) all physicians practicing reproductive medicine at the Clinic hold current, unrestricted medical licenses in [State] and are board-certified in reproductive endocrinology and infertility; (iii) the SART and CDC ART outcome data submitted for the last three reporting cycles is accurate and complete and no voluntary withdrawal from SART reporting is pending; (iv) all embryo storage agreements with patients are current, fully executed, and compliant with applicable state law; and (v) there are no pending or threatened malpractice claims, regulatory investigations, or HIPAA breach notifications that have not been disclosed to Buyer. Seller covenants that during the exclusivity period it will operate the Clinic in the ordinary course of business, will not hire or terminate physicians without Buyer's prior written consent, and will not enter into any new payer contracts or capital expenditure commitments in excess of $[25,000] without Buyer approval.
💡 Sellers frequently resist broad representations around SART data accuracy because historical data was submitted in good faith and corrections are part of the normal CDC reporting process. Narrow the SART representation to material omissions or intentional misstatements rather than strict accuracy. The covenant restricting new payer contracts can create operational problems if a major insurance carrier is mid-negotiation — carve out ordinary-course contract renewals from the consent requirement.
Confidentiality
Establishes that the existence of the LOI, the proposed terms, and all diligence materials shared between the parties are confidential and may not be disclosed to third parties without written consent, except to advisors bound by equivalent confidentiality obligations. In fertility clinics, premature disclosure of a sale process can trigger physician departures, patient anxiety, and competitive poaching by rival networks.
Example Language
Each party agrees to keep the existence of this LOI, the proposed transaction, and all information exchanged in connection herewith strictly confidential and shall not disclose any such information to any third party without the prior written consent of the other party, except to such party's attorneys, accountants, lenders, and financial advisors who have a need to know and who are bound by confidentiality obligations no less protective than those contained herein. Notwithstanding the foregoing, either party may make disclosures required by applicable law or regulation, provided that the disclosing party gives the other party prompt prior written notice and cooperates in seeking any available protective order. The parties acknowledge that premature disclosure of this transaction to Clinic staff, patients, or referring physicians could cause irreparable harm and agree that any breach of this provision shall entitle the non-breaching party to seek injunctive relief without the requirement of posting a bond.
💡 Fertility clinic sellers should insist on a mutual confidentiality provision — not just seller-side obligations. Buyers, particularly PE platforms, may inadvertently disclose deal targets to operating partners or portfolio companies in related markets. The injunctive relief carveout is standard and appropriate given the patient relationship sensitivity of fertility practices. Ensure the confidentiality clause survives termination of the LOI for at least 24 months.
Indemnification Framework
Outlines the general structure of post-closing indemnification obligations, including survival periods, deductible baskets, caps, and any specific carveouts for known risks identified during diligence. Fertility clinic LOIs should reference specific indemnification categories relevant to the industry, including HIPAA violations, malpractice tail obligations, and pre-close embryo storage liability.
Example Language
The Definitive Agreement shall include customary indemnification provisions, including: (i) a general indemnification survival period of [18] months post-close for general representations and warranties, [36] months for tax representations, and the applicable statute of limitations for fraud; (ii) a deductible basket of $[X] (representing approximately 0.5% of enterprise value) below which no indemnification claims may be made, converting to a tipping basket upon breach; (iii) an indemnification cap equal to [15]% of the total purchase price for general representations and warranties, with an uncapped carveout for fraud, intentional misrepresentation, physician licensure representations, HIPAA violations, and pre-close embryo disposition liabilities; and (iv) Seller's obligation to maintain or purchase malpractice tail coverage for all claims arising from services rendered prior to the closing date for a minimum of [5] years, with Buyer listed as an additional insured.
💡 The malpractice tail coverage obligation is non-negotiable from a buyer's perspective — a founding RE's clinical history carries long-tail liability exposure that can surface years after close. Sellers should negotiate who bears the cost of tail premiums; buyers often agree to share the cost given the premium can represent 1–3x annual malpractice insurance costs. Rep and warranty insurance is increasingly used in fertility clinic deals above $10M in enterprise value and can reduce the seller's escrow holdback requirements significantly.
Physician Compensation Normalization Methodology
The most consequential valuation variable in a fertility clinic LOI is how the buyer normalizes founding physician compensation to calculate EBITDA. A founding RE earning $750K–$1.2M annually at a clinic generating $3M in EBITDA will be adjusted to a market replacement rate of $350K–$500K, potentially adding $300K–$700K to normalized EBITDA and materially increasing the purchase price. Both parties should agree on the specific market compensation benchmark — typically MGMA or AMGA data for reproductive endocrinologists — and the exact add-back amount before the LOI is signed to prevent a major valuation dispute mid-diligence.
Earnout Metric Selection: EBITDA vs. IVF Cycle Volume
Earnouts in fertility clinic deals typically run 2–5 years and represent 10–25% of total deal value. The choice of earnout metric is heavily negotiated. Buyers prefer EBITDA-based earnouts because they tie payout to profitability; sellers prefer cycle volume or gross collections because they reflect physician-controlled activity rather than management decisions the seller cannot influence post-close. A hybrid structure — cycle volume as the primary trigger with an EBITDA floor as a secondary gate — is the most durable compromise and should be defined specifically in the LOI to avoid renegotiation later.
Rollover Equity Percentage and Governance Rights
When a founding RE retains 20–40% rollover equity in the post-close MSO entity, the LOI should specify not just the percentage but the governance rights attached to that minority stake. Does the physician have board representation? Approval rights over major capital expenditures, physician hiring decisions, or payer contract terminations? Information rights? Fertility clinics are operationally dependent on the founding physician's reputation and referral relationships, giving them negotiating leverage to insist on meaningful minority protections. Define the equity class, liquidation preference, and exit rights in the LOI to prevent a protracted shareholders' agreement negotiation post-signing.
MSO Management Fee Structure
The management services agreement between the buyer's MSO and the seller's professional corporation must specify the management fee, which is typically structured as a percentage of net collections (commonly 25–40% in fertility clinics) or a flat fee plus performance bonus. The management fee directly affects the professional corporation's reported profitability and the physician's post-close compensation. Sellers should negotiate a cap on management fee increases during the earnout period so that buyer cannot reduce the clinic's apparent EBITDA through fee escalation. This term is often left vague in LOIs and causes significant friction during definitive agreement drafting.
Embryo Storage and Patient Prepayment Liabilities
Fertility clinics frequently hold patient funds prepaid for future IVF cycles, embryo storage fees, and in some cases donor egg cycles that have not yet commenced. These represent real liabilities that must be assigned, assumed, or discharged as part of the transaction. The LOI should specifically state whether patient prepayments for future clinical services are included in working capital, assumed by the buyer, or discharged by the seller before close. Embryo storage agreements — which can extend decades under some state laws — must also be addressed. Failing to define these in the LOI typically results in a significant working capital dispute at close.
Corporate Practice of Medicine Compliance Structure
Every fertility clinic LOI must acknowledge the applicable state's corporate practice of medicine doctrine and confirm that the parties intend to structure the transaction in compliance with it. The LOI should name the structure — typically an MSO holding the business assets with a physician-owned PC retaining clinical operations — and confirm that both parties' counsel have reviewed the structure for compliance with the specific state's CPOM rules. Buyers who operate in multiple states frequently use a single template structure that is not compliant in all states; sellers in California, Texas, or New York must insist on state-specific legal review before signing.
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Most fertility clinic transactions are structured as asset purchases of the MSO entity combined with a long-term management services agreement with the physician-owned professional corporation, rather than a pure equity purchase of the clinical entity. This is because state corporate practice of medicine laws prohibit non-physicians from owning the entity that employs physicians and makes clinical decisions. The MSO acquires all non-clinical business assets — equipment, contracts, brand, and real estate — while the PC remains physician-owned and contracted to provide clinical services exclusively to the MSO. In states with less strict CPOM enforcement, equity purchases of the operating entity are sometimes structured with a physician nominee shareholder arrangement, but this carries regulatory risk and should be reviewed by healthcare counsel with specific state expertise before the LOI is signed.
The LOI should explicitly address the physician transition timeline and tie the earnout and seller note repayment schedule to the physician's continued clinical involvement. At minimum, the LOI should specify the expected employment term for the founding RE post-close, define what constitutes a qualifying associate RE hire that reduces key-person dependency, and set conditions under which the earnout accelerates or terminates if the physician exits early. Buyers should insist on a minimum 2-year post-close employment commitment from the founding RE and a covenant to actively recruit and onboard an associate reproductive endocrinologist within 12 months of closing. Sellers planning a shorter transition should negotiate a higher upfront cash component to offset the earnout they will not fully collect.
The LOI should include seller representations confirming that the clinic is a current SART member in good standing, that CDC ART outcome data submitted for the last three reporting cycles was accurate and complete to the best of the seller's knowledge, that no voluntary non-participation in SART reporting has occurred in the last five years, and that no adverse findings, corrective action plans, or data quality flags have been issued by SART or the CDC. Buyers should also confirm as a condition to closing that no material changes to the clinic's published success rates will be required due to data corrections identified during diligence. These representations are particularly important because SART data is publicly visible to prospective patients and directly influences the clinic's marketing effectiveness and patient volume.
No. Fertility clinic acquisitions are not eligible for SBA 7(a) or 504 loan financing because the healthcare services provided — including IVF, embryo transfer, and assisted reproductive technology — are classified in a way that disqualifies them under SBA affiliation rules and passive income restrictions when structured through an MSO. Additionally, the management services organization structure common in fertility clinic deals creates equity and control complexities that are incompatible with SBA lending requirements. Buyers should expect to finance fertility clinic acquisitions through a combination of private equity capital, senior debt from healthcare-focused lenders, seller financing, and physician rollover equity rather than government-backed loan programs.
Working capital in a fertility clinic LOI is typically defined as current assets minus current liabilities, using a trailing 12-month average as the target. The most important exclusions to negotiate explicitly are patient prepayments for future IVF cycles not yet rendered, embryo storage deposits, donor egg escrow funds, and any refund liabilities for canceled treatment cycles. These items represent cash received but services not yet delivered and can be significant — a single IVF cycle package averages $15,000–$25,000, and a clinic with 200 active patients in mid-cycle could carry $500,000 or more in deferred revenue. Sellers should ensure these obligations are either discharged before close, assumed by the buyer at an agreed value, or explicitly carved out of the working capital target to avoid a large post-close true-up adjustment.
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