A practical LOI framework built for audiology practice acquisitions — covering purchase price, earnouts tied to patient retention, audiologist stay-on terms, and manufacturer agreement protections.
A Letter of Intent (LOI) is the foundational document in any hearing center acquisition. It establishes the proposed purchase price, deal structure, key conditions, and exclusivity period before the parties invest in full legal documentation and due diligence. For hearing center transactions, the LOI must address industry-specific realities that generic business LOI templates miss entirely — including how to handle the departing owner-audiologist's patient relationships, what happens to manufacturer exclusivity agreements at close, and how earnouts should be tied to hearing aid unit volumes and patient retention rather than revenue alone. Buyers backed by PE roll-up platforms will bring standardized LOI language; individual and SBA buyers must negotiate from a position of equal preparation. Sellers should review every term carefully, particularly exclusivity periods and earnout calculation methodologies, before signing. This guide walks through each section of a hearing center LOI with example language and negotiation notes tailored to the $1M–$5M revenue segment.
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Identifies the buyer entity, seller entity, and the business being acquired. For hearing centers, this section should clearly specify whether the acquisition is an asset purchase or stock purchase, as this has significant implications for Medicare provider agreements, manufacturer contracts, and existing liabilities.
Example Language
This Letter of Intent is entered into as of [Date] between [Buyer Entity Name], a [State] [LLC/Corporation] ('Buyer'), and [Seller Name], an individual and sole owner of [Hearing Center Business Name], a [State] [LLC/Corporation] ('Company'), located at [Address]. Buyer proposes to acquire substantially all assets of the Company, including the patient database, hearing aid inventory, audiology equipment, manufacturer agreements, and the trade name, through an asset purchase transaction.
💡 Sellers should push for a stock sale if the practice holds favorable manufacturer rebate agreements or Medicare provider numbers that are easier to transfer under a stock structure. Buyers acquiring via SBA financing will typically prefer an asset purchase. Clarify upfront which structure is intended to avoid costly restructuring late in the process.
Purchase Price and Valuation Basis
States the proposed total consideration, including how the purchase price was derived. For hearing centers, purchase price is typically expressed as a multiple of trailing twelve-month or three-year average EBITDA, adjusted for owner compensation normalization. Valuation multiples for established hearing centers with clean compliance records typically range from 3.5x to 6x EBITDA depending on patient base size, revenue diversification, and associate audiologist staffing.
Example Language
Buyer proposes a total purchase price of $[Amount] ('Purchase Price'), representing approximately [X.Xx] times the Company's trailing twelve-month adjusted EBITDA of $[Amount], as documented in the Company's 2023 CPA-prepared financial statements. The Purchase Price reflects the going-concern value of the patient database, recurring hearing aid service revenue, and established manufacturer relationships. Purchase Price shall be subject to adjustment pending completion of due diligence, including verification of active patient count, hearing aid unit volumes, and billing compliance review.
💡 Sellers should provide a clear add-back schedule normalizing for owner compensation above market-rate replacement cost, personal vehicle expenses, and any one-time costs. Buyers should resist accepting EBITDA figures that include manufacturer rebate income without confirming those agreements are transferable. A price adjustment mechanism tied to active patient count — typically defined as patients seen within the prior 24 months — protects both parties.
Deal Structure and Financing
Outlines how the purchase price will be funded, including equity, SBA loan proceeds, seller note, and any earnout component. Most hearing center acquisitions in the $1M–$3M range are SBA 7(a) eligible, with buyers contributing 10–20% equity, financing 70–80% through an SBA lender, and bridging the gap with a seller note that is on full standby during the SBA loan term.
Example Language
The Purchase Price shall be funded as follows: (i) Buyer equity injection of approximately $[Amount] representing [X]% of total consideration; (ii) SBA 7(a) loan proceeds of approximately $[Amount] from [Lender Name or 'an SBA-approved lender']; and (iii) a Seller Note of $[Amount] bearing interest at [X]% per annum, payable over [X] years, with full standby provisions for the duration of the SBA loan in compliance with SBA Standard Operating Procedures. The transaction is contingent upon receipt of SBA loan commitment satisfactory to Buyer within [45–60] days of LOI execution.
💡 Sellers should negotiate the interest rate and repayment schedule on the seller note carefully — rates of 5–7% over 5–7 years are typical. Buyers should confirm SBA lender comfort with the hearing center's Medicare revenue concentration before signing the LOI, as some lenders discount reimbursement-dependent cash flows. If an earnout is included, sellers should insist it is structured in addition to — not as a replacement for — the seller note.
Earnout Structure
Defines any contingent consideration tied to post-close business performance. In hearing center acquisitions, earnouts are commonly tied to patient retention rates, hearing aid unit sales volume, or total revenue over the 12–24 months following close. This section must define measurement periods, calculation methodology, reporting obligations, and dispute resolution.
Example Language
In addition to the base Purchase Price, Buyer agrees to pay Seller an earnout of up to $[Amount] calculated as follows: (i) $[Amount] if the Company retains no less than [80]% of active patients, defined as patients with a documented visit or hearing aid purchase within 24 months prior to closing, through the first 12 months post-close; and (ii) $[Amount] if hearing aid unit sales during months 13–24 post-close equal or exceed [X] units per quarter, consistent with the trailing four-quarter average prior to close. Buyer shall provide Seller with quarterly earnout reports within 30 days of each quarter end. Disputes regarding earnout calculations shall be submitted to a mutually agreed independent CPA for binding resolution.
💡 Sellers should insist that earnout metrics exclude disruptions caused by the buyer's operational changes, staffing decisions, or manufacturer relationship modifications made post-close. If the seller is staying on as clinical director, the earnout should not be forfeitable due to buyer-directed changes to scheduling, pricing, or marketing. Buyers should ensure earnout targets are based on documented pre-close averages, not projections, and that patient retention is defined precisely in writing.
Seller's Role Post-Close and Non-Compete
Specifies the selling audiologist's employment or consulting role after close, duration, compensation, and the scope of any non-compete and non-solicitation restrictions. This is one of the most heavily negotiated sections in hearing center deals because patient loyalty is personal and the departing audiologist's continued involvement directly impacts patient retention and earnout performance.
Example Language
Seller shall remain engaged as Clinical Director of the Company for a period of [12–24] months following the Closing Date, at a compensation rate of $[Amount] per [month/year], to facilitate patient transition, maintain manufacturer relationships, and support staff continuity. Following the employment period, Seller agrees to a non-compete restriction prohibiting the establishment or operation of a competing audiology or hearing aid retail practice within [15–25] miles of the Company's primary location for a period of [3–5] years from the Closing Date. Seller further agrees to a non-solicitation restriction prohibiting the direct solicitation of the Company's patients or employees for the same period.
💡 Sellers should negotiate compensation during the stay-on period at or near their pre-sale draw to avoid a significant income reduction. Non-compete radius and duration are heavily dependent on local market density — urban sellers should negotiate tighter radii while rural sellers may accept broader geographic restrictions in exchange for shorter duration. Non-solicitation of patients is generally non-negotiable for buyers given the relationship-driven nature of the practice.
Due Diligence Conditions and Access
Outlines the scope and timeline for buyer's due diligence investigation, including access to financial records, patient database, licensing documentation, Medicare billing records, manufacturer agreements, and equipment inventories. For hearing centers, due diligence typically requires 45–60 days given the complexity of Medicare compliance review and the sensitivity of patient records under HIPAA.
Example Language
Following execution of this LOI and a mutually executed Non-Disclosure Agreement, Seller shall provide Buyer with full access to the following within [10] business days: (i) three years of CPA-prepared financial statements and tax returns; (ii) current hearing aid inventory list with cost basis; (iii) all audiologist and staff licensure documentation; (iv) Medicare and commercial insurance billing records for the prior 24 months including coding documentation; (v) all manufacturer agreements, rebate schedules, and preferred provider contracts; (vi) patient database summary including total active patient count, visit frequency, and average revenue per patient, provided in a HIPAA-compliant format; and (vii) current lease agreement and any renewal options. Buyer shall complete due diligence within [45] days of receiving complete documentation.
💡 Sellers should require a signed HIPAA Business Associate Agreement before sharing any patient-level data. Buyers should engage a healthcare compliance consultant specifically familiar with Medicare audiology billing — not a generalist — to review coding and reimbursement records. Undisclosed Medicare overpayment obligations or compliance audit findings discovered during due diligence are grounds for purchase price renegotiation or deal termination.
Exclusivity Period
Grants the buyer an exclusive negotiating window during which the seller agrees not to market the business or entertain competing offers. For hearing center deals, exclusivity periods typically run 45–75 days to accommodate SBA lender review, audiology-specific due diligence, and license transfer planning.
Example Language
In consideration of Buyer's investment of time and resources in due diligence and financing, Seller agrees to an exclusivity period of [60] days from the date of LOI execution ('Exclusivity Period'), during which Seller shall not, directly or indirectly, solicit, encourage, or enter into discussions with any other prospective buyer regarding the sale or transfer of the Company or its assets. If the parties have not executed a definitive Purchase Agreement by the end of the Exclusivity Period, either party may terminate this LOI without further obligation, subject to the surviving provisions set forth herein.
💡 Sellers should resist exclusivity periods exceeding 60 days unless the buyer can demonstrate SBA pre-qualification or proof of funds. Buyers should request milestone checkpoints — for example, SBA application submitted within 15 days and due diligence complete within 45 days — to keep the process moving. Sellers who grant long exclusivity to buyers who are not SBA pre-approved risk losing months of market exposure if financing falls through.
Conditions to Closing
Lists the material conditions that must be satisfied before the transaction can close. For hearing centers, these include audiologist license transfer or new hire confirmation, Medicare provider agreement reassignment or new enrollment, lease assignment approval, and manufacturer agreement consent to transfer.
Example Language
The obligations of Buyer to consummate the acquisition are conditioned upon the satisfaction of the following conditions prior to or at Closing: (i) Buyer's confirmation that a licensed audiologist meeting applicable state credentialing requirements will be employed at the practice on the Closing Date; (ii) receipt of Medicare enrollment approval or provider agreement reassignment in a form acceptable to Buyer; (iii) written consent from the landlord to assign the existing lease or execute a new lease on terms acceptable to Buyer; (iv) written confirmation from primary hearing aid manufacturer(s) that existing supplier and rebate agreements will be honored post-close or that equivalent agreements will be made available to Buyer; and (v) no material adverse change in the Company's patient volume, revenue, or compliance status between the date of this LOI and Closing.
💡 Buyers should not proceed to closing without confirmed Medicare enrollment — delays in CMS processing can add 60–90 days after deal signing and affect cash flow. Sellers should proactively contact manufacturer representatives and the landlord as soon as LOI is signed to accelerate consent timelines. Material adverse change clauses should define specific thresholds — for example, a decline of more than 15% in monthly hearing aid unit sales — rather than leaving them open to subjective interpretation.
Confidentiality and Non-Disclosure
Establishes mutual confidentiality obligations protecting sensitive business information exchanged during the transaction process, including patient data, financial records, manufacturer pricing, and employee information.
Example Language
Each party agrees to maintain in strict confidence all non-public information disclosed in connection with this transaction, including but not limited to financial statements, patient database summaries, manufacturer rebate structures, and employee compensation data. Neither party shall disclose the existence or terms of this LOI or the proposed transaction to any third party, including staff or patients of the Company, without the prior written consent of the other party, except as required to obtain professional advice from attorneys, accountants, or lenders who are themselves bound by confidentiality obligations. These confidentiality obligations shall survive termination of this LOI for a period of three years.
💡 Staff and patient confidentiality is especially critical in hearing center deals. A premature announcement can trigger immediate patient attrition and audiologist staff departures. Sellers should avoid disclosing the transaction to any staff member until a definitive agreement is signed and a joint communication plan is in place. Buyers should confirm that their SBA lender's information requests will not trigger inadvertent disclosure.
Binding and Non-Binding Provisions
Clarifies which sections of the LOI are legally binding and which represent non-binding statements of intent. In most LOIs, only confidentiality, exclusivity, and governing law provisions are binding, while valuation and deal structure terms remain non-binding until a definitive purchase agreement is executed.
Example Language
The parties acknowledge that this LOI does not constitute a binding agreement to complete the proposed transaction, and neither party shall have any legal obligation to consummate the acquisition unless and until a definitive Asset Purchase Agreement has been fully executed by both parties. Notwithstanding the foregoing, the following provisions of this LOI shall be legally binding upon execution: (i) Confidentiality and Non-Disclosure (Section [X]); (ii) Exclusivity Period (Section [X]); and (iii) Governing Law and Dispute Resolution (Section [X]). All other terms and conditions set forth herein are expressions of intent only and are subject to negotiation, due diligence findings, and execution of definitive agreements.
💡 Both parties should have legal counsel review the LOI before signing even though most terms are non-binding. Courts have in rare cases enforced non-binding LOI terms if conduct suggests reliance — particularly exclusivity and confidentiality provisions. Buyers should not begin submitting SBA applications, hiring attorneys, or making commitments to staff without understanding that the deal is not contractually guaranteed until definitive documents are signed.
Active Patient Count Definition and Verification
The number of active patients is the single most important value driver in a hearing center acquisition. Buyers and sellers must agree in the LOI on an exact definition — typically patients with a documented visit, hearing aid purchase, or service appointment within 24 months prior to close — and a verification methodology. Disputes over what counts as an active patient can shift the purchase price by hundreds of thousands of dollars in earnout-based deals.
Manufacturer Agreement Transferability and Rebate Continuity
Many hearing center valuations assume continuation of manufacturer rebate income that is tied to volume thresholds and preferred provider status. Buyers must confirm in writing before closing that manufacturer agreements — including rebate tiers, exclusivity obligations, and minimum purchase commitments — will transfer to the new entity or be re-executed on equivalent terms. Sellers should disclose all exclusivity obligations that could limit a buyer's ability to add competing brands post-close.
Seller Stay-On Compensation and Departure Triggers
The structure of the selling audiologist's post-close role significantly affects patient retention and earnout achievement. Negotiate clearly defined compensation, working hours, patient-facing responsibilities, and termination triggers. If the seller can walk away early with no penalty, earnout targets become difficult to achieve. If the buyer can terminate the arrangement prematurely, the seller loses meaningful income and patient transition support is undermined.
Medicare Enrollment and Billing Compliance Representations
Sellers must represent and warrant the accuracy of Medicare billing records, the absence of ongoing audits or unresolved overpayment demands, and the compliance of all coding practices with applicable CMS guidelines. Buyers should negotiate for an escrow holdback of 5–10% of the purchase price to cover indemnification obligations if Medicare compliance issues surface within 12–24 months post-close.
Earnout Measurement Exclusions for Buyer-Caused Changes
If the buyer alters the practice's staffing, pricing, manufacturer relationships, or service offerings post-close, and those changes negatively affect hearing aid unit volume or patient retention, the seller should not be penalized on earnout calculations. Negotiate specific carve-outs that exclude buyer-initiated operational changes from earnout metric calculations, and establish a dispute resolution mechanism that relies on an independent CPA review rather than buyer self-reporting.
Hearing Aid Inventory Valuation and Adjustment
Hearing aid inventory is a significant tangible asset that must be counted, valued at cost, and adjusted at close. Establish a cutoff date for inventory valuation, a mechanism for handling obsolete or discontinued models, and clarity on whether inventory is included in the purchase price or treated as a separate line item with a dollar-for-dollar adjustment at close.
Lease Assignment Terms and Landlord Consent Timeline
Hearing center locations depend heavily on accessibility, visibility, and parking — all embedded in the existing lease. Negotiate a specific deadline by which landlord consent to lease assignment must be obtained, and define buyer's rights to terminate the LOI if consent is withheld or the landlord proposes material changes to lease terms. Sellers should engage the landlord immediately upon LOI signing to prevent timing delays that could jeopardize close.
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Most LOI terms are intentionally non-binding — they represent a mutual statement of intent to proceed toward a definitive purchase agreement. However, specific sections are typically written as binding obligations: confidentiality, exclusivity, and governing law provisions. In hearing center deals, the binding confidentiality clause is especially important because patient records, manufacturer pricing, and staff compensation information are exchanged during due diligence. Both parties should have legal counsel review the LOI before signing, even for non-binding terms, because courts can sometimes find implied obligations based on conduct and reliance.
Hearing centers in the $1M–$5M revenue range typically trade at 3.5x to 6x adjusted EBITDA, depending on the strength of several key factors. Higher multiples are justified when the practice has an associate audiologist on staff reducing owner dependency, strong patient retention data, transferable manufacturer rebate agreements, and clean Medicare billing records. Lower multiples apply when the business is a single-provider practice, has declining unit volume, or has outstanding compliance concerns. For LOI purposes, cite the specific trailing twelve-month adjusted EBITDA figure and the multiple applied so both parties are aligned on the valuation basis before due diligence begins.
The most common structure in hearing center acquisitions is a 12–24 month Clinical Director or Lead Audiologist role for the seller at a negotiated salary, with defined patient transition responsibilities and minimum hours per week. This stay-on period directly supports earnout achievement because patient loyalty in audiology is personal and deeply relationship-driven. The LOI should specify compensation, the minimum duration of the engagement, conditions under which either party can terminate early, and what happens to earnout calculations if the seller departs before the earnout measurement period ends.
Yes, hearing center acquisitions are generally SBA 7(a) eligible provided the business meets size standards and the buyer meets creditworthiness requirements. The LOI should explicitly state that the transaction is contingent on SBA loan commitment, identify the anticipated financing structure including equity injection percentage and seller note terms, and include a clear deadline — typically 45–60 days — for the buyer to obtain a satisfactory loan commitment. Sellers should note that SBA lenders will require a full standby provision on any seller note during the SBA loan term, meaning seller note payments cannot begin until the SBA loan is retired or a waiver is obtained.
The LOI should include a seller representation that no active Medicare audits, open overpayment demands, or unresolved compliance investigations exist at the time of signing. It should also condition the buyer's closing obligation on satisfactory completion of a Medicare billing compliance review covering at least 24 months of claims history, conducted by a qualified healthcare compliance professional. Buyers should negotiate a purchase price escrow holdback of 5–10% for 12–24 months post-close to cover any Medicare overpayment liabilities that surface after closing. Given that CMS can pursue overpayments retroactively up to three years, this protection is essential in any hearing center deal.
Hearing aid inventory should be treated as a separate asset with its own valuation methodology rather than bundled into the purchase price multiple. The LOI should specify that inventory will be counted and valued at the seller's actual cost within a defined number of days before closing, and that the purchase price will be adjusted dollar-for-dollar based on the final inventory count. Define how obsolete or discontinued models will be valued — typically at a discount to cost or excluded entirely. Buyers should also confirm during due diligence that inventory levels are consistent with normal operating volumes and have not been artificially inflated or reduced ahead of sale.
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