A deal-ready LOI framework built for medical aesthetics acquisitions — covering purchase price, CPOM-compliant structure, provider retention, deferred revenue, and earnout provisions specific to the med spa industry.
Acquiring a med spa is fundamentally different from buying a conventional service business. The intersection of healthcare regulation, physician oversight requirements, elective consumer spending, and provider-dependent revenue creates a set of LOI considerations that go well beyond a standard asset purchase. Before you submit an offer on a med spa generating $1M–$5M in revenue, your Letter of Intent must address the corporate practice of medicine structure, medical director continuity, key injector retention risk, deferred revenue from pre-sold packages and memberships, and state-specific licensing transition timelines. This guide breaks down each LOI section with example language and negotiation notes tailored specifically to medical aesthetics transactions in the lower middle market. Whether you are a private equity-backed roll-up platform, an entrepreneurial physician, or a nurse practitioner acquiring your first practice, this framework gives you the foundation for a well-structured, enforceable LOI that signals sophistication and protects your interests from day one.
Find Med Spa Businesses to AcquireParties and Transaction Structure
Identify the buyer entity, seller entity, and the specific legal structure of the transaction. Med spa acquisitions almost always require an asset purchase structure — not a stock purchase — to isolate liability and comply with corporate practice of medicine laws. In CPOM-restricted states, the deal must separate the clinical medical entity (owned or controlled by a licensed physician) from the management services company (which the buyer acquires). This section establishes that architecture upfront.
Example Language
Buyer: [Buyer Entity Name], a [State] LLC, proposes to acquire substantially all operating assets of [Seller Business Name], a [State] entity, through an asset purchase transaction. To the extent required by applicable corporate practice of medicine statutes in [State], the transaction will be structured as a Management Services Agreement (MSA) between the Buyer's management company and a physician-owned Professional Corporation (PC), with the PC retaining nominal ownership of all clinical operations. The parties acknowledge that final transaction structure is subject to legal review and compliance with applicable state licensing and CPOM requirements.
💡 Sellers sometimes resist the MSA/PC structure because it adds legal complexity and cost. Frame it as a buyer protection mechanism that also protects the seller's medical license post-close. If the seller already has a separate PC and management entity in place, note this as a value-positive factor. Clarify in the LOI whether the buyer will also acquire or novate the medical director agreement, and identify who bears the cost of restructuring legal fees.
Purchase Price and Valuation Basis
State the proposed total purchase price, the EBITDA or SDE basis used to derive it, and the implied multiple. Med spas in the lower middle market typically trade at 3.5x–6x EBITDA depending on revenue quality, membership penetration, and provider diversification. The LOI should reference the specific trailing twelve-month financials reviewed and include a clear definition of adjusted EBITDA with add-backs.
Example Language
Buyer proposes a total enterprise purchase price of $[X], representing approximately [Y]x the Seller's trailing twelve-month adjusted EBITDA of $[Z] as reported for the period ending [Date]. Adjusted EBITDA includes add-backs for owner compensation above market replacement cost, non-recurring legal or equipment expenses, and personal expenses run through the business, as mutually agreed during due diligence. The purchase price is subject to adjustment based on findings during the due diligence period, including but not limited to verification of active patient count, deferred revenue liability, and equipment condition.
💡 Med spa sellers frequently overstate EBITDA by excluding the cost of a replacement medical director, under-reporting owner compensation, or failing to account for deferred revenue as a liability. Push to define 'adjusted EBITDA' explicitly in the LOI rather than leaving it to negotiation at closing. If the seller's revenue is heavily provider-dependent, propose a lower base multiple (3.5x–4.5x) with upside through an earnout tied to retention of key revenue post-transition.
Payment Terms and Deal Structure
Break down how the purchase price will be funded — typically a combination of SBA 7(a) debt, seller financing, buyer equity, and an earnout. Med spa acquisitions frequently include a seller note to bridge valuation gaps and an earnout tied to post-close revenue or EBITDA performance, especially when provider retention risk is high.
Example Language
The proposed purchase price of $[X] will be funded as follows: (i) approximately $[A] financed through an SBA 7(a) loan subject to lender approval; (ii) a seller note of $[B] at [X]% annual interest, payable over [24–36] months, subordinated to senior lender requirements; and (iii) a performance-based earnout of up to $[C], payable over 24 months post-close, contingent upon the Business achieving trailing EBITDA of no less than $[D] in each earnout measurement period. Buyer equity injection will equal no less than 10% of the total transaction value as required by SBA guidelines.
💡 Sellers in the med spa space often resist earnouts because they view them as speculative and difficult to control post-close. To gain acceptance, tie the earnout to metrics the seller can directly influence during a transition period — such as patient retention rate or membership revenue — rather than blended EBITDA. If you are using SBA financing, alert the seller early that the lender will require a seller note to be on full standby, which limits the seller's ability to call it in early.
Due Diligence Period and Access
Define the length of the due diligence period, the categories of information the buyer requires access to, and any exclusivity provisions during that window. Med spa due diligence requires specialized review of medical director agreements, state licensing compliance, provider contracts, malpractice history, deferred revenue reconciliation, and equipment records — all of which take more time than standard business due diligence.
Example Language
Upon execution of this LOI, Buyer shall have an exclusive due diligence period of [45–60] days to review all financial, operational, legal, regulatory, and clinical documentation reasonably requested by Buyer and its advisors. Seller agrees to provide timely access to, at minimum: (i) three years of financial statements and tax returns; (ii) current medical director agreement and all provider employment or contractor agreements; (iii) state licensing documentation and any regulatory correspondence; (iv) equipment inventory with purchase dates, lease or ownership status, and maintenance records; (v) deferred revenue schedule reconciling all outstanding package balances and membership obligations; and (vi) patient database metrics including active patient count, average annual spend, and retention rates.
💡 Forty-five to sixty days is appropriate for a med spa acquisition given the regulatory complexity. Sellers who push back on the length are often hiding compliance issues — treat resistance as a yellow flag. Make exclusivity a non-negotiable during due diligence. Sellers in competitive markets may resist exclusivity; if so, consider a modest exclusivity deposit ($10K–$25K) that is credited toward the purchase price at closing and forfeited only if the buyer walks without cause.
Medical Director and Licensing Continuity
Address what happens to the medical director arrangement at close. This is one of the most deal-critical issues in med spa acquisitions. If the current medical director is the selling owner, the LOI must specify the transition period, compensation during that period, and the plan for replacing or retaining the medical director. If the medical director is a third party, confirm the agreement is assignable or novatable.
Example Language
Seller represents that a licensed physician currently serves as medical director under a written Medical Director Agreement (MDA) dated [Date]. Buyer's obligation to close is conditioned upon (i) confirmation that the MDA is assignable to Buyer's designated entity or replaceable with a substantially equivalent arrangement without material service disruption; (ii) Seller's cooperation in introducing Buyer to the current medical director and facilitating a written transition agreement; and (iii) Buyer's satisfaction that the medical director arrangement complies with all applicable state CPOM, fee-splitting, and supervision laws. In the event the current medical director is the Seller or an affiliated party, the parties will negotiate a transition services period of no less than [90–180] days at a mutually agreed medical director fee.
💡 Many seller-owners serve as their own medical director, which creates both a compliance structure issue and a key-person risk. If this is the case, push for a minimum 90-day post-close transition with a written protocol for patient handoffs and provider supervision. Verify during due diligence that the medical director is performing required supervisory visits and maintaining documentation — a rubber-stamp medical director with no real oversight creates regulatory liability the buyer inherits.
Provider and Staff Retention
Specify the buyer's expectations for key employee retention and the seller's obligations to support a smooth transition with key injectors, aestheticians, and front-desk staff. Provider-dependent revenue is the single greatest source of post-close value erosion in med spa acquisitions.
Example Language
Buyer acknowledges that revenue retention post-close is substantially dependent upon the continuity of key clinical providers. As a condition to closing, Seller shall use commercially reasonable efforts to assist Buyer in (i) securing written employment or contractor continuation agreements with all providers generating $[X] or more in annual revenue; (ii) introducing Buyer to key staff prior to closing under a mutually agreed confidentiality protocol; and (iii) providing a written revenue attribution report identifying the percentage of trailing twelve-month revenue attributable to each individual provider. Seller agrees not to solicit, recruit, or hire any clinical or operational staff for a period of [24] months following the closing date.
💡 Do not accept vague language like 'Seller will introduce Buyer to key staff.' Require a specific revenue attribution report so you can quantify provider concentration risk before closing. If a single injector drives more than 35% of revenue, treat this as a material risk that should either reduce the purchase price, trigger an earnout mechanic, or result in a structured retention bonus funded from escrow contingent on that provider staying for 12+ months post-close.
Deferred Revenue and Membership Liabilities
Define how pre-sold package balances and outstanding membership obligations will be handled at closing. This is a critical cash flow and liability issue in med spa transactions and must be addressed explicitly in the LOI to avoid surprises at the closing table.
Example Language
Seller shall deliver to Buyer, no later than [10] business days prior to closing, a complete deferred revenue schedule itemizing (i) the aggregate dollar value of all unused pre-paid service packages sold prior to closing; and (ii) the number of active membership subscribers, monthly recurring revenue associated with those memberships, and the estimated service delivery obligations thereunder. The parties agree that deferred revenue liabilities of up to $[X] will be assumed by Buyer as part of the purchase price negotiation, with amounts exceeding $[X] resulting in a dollar-for-dollar reduction in the purchase price. Buyer reserves the right to audit deferred revenue records as part of due diligence.
💡 Deferred revenue is frequently underreported or poorly tracked by med spa sellers, particularly for packages sold years ago that clients have not yet redeemed. Request the raw data from the practice management software (e.g., Aesthetic Record, Nextech, or Jane App) rather than a seller-prepared summary. If deferred revenue liability exceeds 15–20% of annual revenue, renegotiate the purchase price or structure a holdback to cover the cost of honoring those obligations post-close.
Representations, Warranties, and Indemnification
Outline the categories of representations and warranties the seller will be required to make at closing, and establish the general framework for post-close indemnification. In med spa acquisitions, regulatory compliance representations are especially critical given the state-specific nature of CPOM and scope-of-practice laws.
Example Language
At closing, Seller shall make customary representations and warranties including, without limitation: (i) accuracy of financial statements and absence of undisclosed liabilities; (ii) compliance with all applicable state and federal healthcare regulations, including CPOM statutes, medical director supervision requirements, and scope-of-practice rules; (iii) absence of pending or threatened malpractice claims, regulatory investigations, or patient complaints; (iv) validity and transferability of all material contracts, including provider agreements, equipment leases, and the medical director agreement; and (v) accuracy of active patient count, deferred revenue schedules, and equipment inventory representations. Seller agrees to indemnify Buyer for losses arising from breaches of these representations for a period of [24] months following closing, subject to a deductible of $[X] and a cap of [Y]% of the purchase price.
💡 Regulatory representations are non-negotiable in med spa deals. Sellers sometimes push back on CPOM compliance reps because they are uncertain about their own compliance posture — treat this as a major red flag requiring independent legal review. Consider requiring a compliance audit as part of due diligence rather than relying solely on seller reps. Standard indemnification caps in lower middle market deals range from 10–25% of purchase price; for med spa deals with meaningful regulatory exposure, push for 20–25%.
Non-Compete and Non-Solicitation
Define the geographic scope, duration, and covered activities of the seller's post-close non-compete and non-solicitation obligations. In med spa acquisitions, the seller's personal patient relationships and injecting skills create acute re-entry risk that must be addressed with enforceable restrictions.
Example Language
As a condition of closing, Seller and any key individual principals shall execute a Non-Competition and Non-Solicitation Agreement prohibiting: (i) direct or indirect ownership, operation, employment, or consulting for any medical spa, aesthetics clinic, or competing elective procedure business within a [15–25] mile radius of any Business location for a period of [3–5] years following closing; and (ii) solicitation of any patient, employee, or contractor of the Business for a period of [3] years following closing. The parties acknowledge that injecting services and aesthetic treatment provision by Seller within the restricted area and period would cause irreparable harm to Buyer and that injunctive relief shall be an available remedy.
💡 State enforceability of non-competes varies significantly. In California, non-competes are largely unenforceable; in Texas and Florida, they are generally enforceable if reasonable in scope. Consult local counsel before finalizing geographic scope and duration. For seller-operators who are the primary injectors, a 5-year, 20-mile radius restriction is reasonable given the personal nature of patient-provider relationships. Tie the non-compete compensation to the seller note or earnout to create financial alignment.
Confidentiality and Exclusivity
Establish mutual confidentiality obligations for the LOI period and confirm that the seller will not shop the business to other buyers during the due diligence window.
Example Language
Both parties agree to maintain strict confidentiality regarding the existence and terms of this LOI and all information exchanged in connection with the proposed transaction. Seller agrees that from the date of execution of this LOI through the earlier of (i) closing or (ii) termination of this LOI, Seller will not solicit, encourage, or accept acquisition proposals from any third party, nor share confidential business information with any prospective competing buyer. Buyer acknowledges that confidential patient health information disclosed during due diligence is subject to HIPAA and applicable state privacy laws, and Buyer agrees to handle all patient records and protected health information in strict compliance therewith.
💡 HIPAA compliance during due diligence is often overlooked. Establish a clear protocol with the seller for how patient data will be shared — typically through de-identified aggregate reports during early diligence, with access to identifiable records only as necessary and under a Business Associate Agreement. Exclusivity is your most important negotiating chip; do not waive it without a clear reason, and consider a modest earnest money deposit to formalize the commitment.
EBITDA Definition and Add-Back Agreement
Med spa sellers routinely add back owner compensation, personal vehicle expenses, and one-time equipment purchases without fully accounting for the cost of a market-rate medical director, replacement injector salaries, or the capital expenditure required to keep laser and device technology current. Negotiate a detailed, written add-back schedule before agreeing to any purchase price. Disputes over $50K–$100K in add-backs can shift the implied multiple by a full turn at typical med spa deal sizes.
Earnout Structure and Measurement Metrics
Earnouts in med spa deals are common when provider dependency or key-person risk makes the buyer uncomfortable paying full price upfront. Negotiate earnout metrics that are objective and measurable — such as trailing 12-month revenue from existing patients, active membership subscriber count, or gross margin from injectable services — rather than blended EBITDA, which can be manipulated through cost allocation. Ensure the earnout agreement includes anti-sandbagging protections preventing the buyer from starving the business of investment to depress results.
Deferred Revenue Purchase Price Adjustment
The dollar value of unredeemed packages and membership obligations is a real liability the buyer inherits at close. Negotiate a clear threshold — typically $25K–$75K depending on deal size — above which deferred revenue results in a dollar-for-dollar purchase price reduction. Request a full reconciliation from the practice management system during due diligence, not a seller-prepared spreadsheet, and require the seller to represent and warrant its accuracy.
Medical Director Transition and Fee During Holdover
If the seller is the medical director or uses a personal physician relationship as the supervisory arrangement, the buyer needs a contractual bridge. Negotiate a minimum 90–180 day transition period with a written medical director services agreement specifying supervision obligations, fee rate (typically $1,500–$4,000 per month for a part-time arrangement), required site visit frequency, and the seller's obligation to cooperate in recruiting or transitioning to a replacement. Do not allow the seller to walk away from the medical director role at closing without a signed replacement agreement already in place.
Provider Retention Escrow or Contingency
When one or two injectors drive the majority of bookings, negotiate a holdback or escrow — typically 10–15% of the purchase price — that is released to the seller in tranches contingent on key providers remaining employed or contracted for 12–24 months post-close. This aligns the seller's incentive to support a smooth transition and compensates the buyer for revenue loss if key providers depart shortly after closing. Define 'departure' clearly to exclude terminations for cause initiated by the buyer.
Find Med Spa Businesses to Acquire
Enough information to write a strong LOI on day one — free to join.
Yes — significantly different. A med spa LOI must address issues that simply do not exist in conventional business acquisitions: corporate practice of medicine compliance and entity structure, medical director agreement continuity, provider-level revenue attribution, HIPAA-compliant due diligence protocols, and deferred revenue liability from pre-sold packages and memberships. Using a generic LOI template for a med spa acquisition is one of the most common mistakes buyers make, and it often results in expensive renegotiation or deal failure once the regulatory complexity becomes apparent.
Med spas in the $1M–$5M revenue range typically trade at 3.5x–6x trailing twelve-month adjusted EBITDA. The multiple depends on revenue quality, membership penetration, provider diversification, equipment age, compliance history, and location demographics. A well-run med spa with 300+ active members, a team of employed injectors (not owner-dependent), and clean financials in a high-income suburban market can command 5x–6x. A single-provider practice with no membership program and outdated equipment will trade closer to 3.5x–4x, if at all.
The LOI should require the seller to deliver a complete deferred revenue reconciliation — pulled directly from the practice management system — before closing. Establish a threshold in the LOI above which outstanding deferred revenue triggers a dollar-for-dollar reduction in the purchase price. Buyers inherit the obligation to honor pre-sold packages and memberships post-close, so this liability must be quantified accurately during due diligence. In some deals, deferred revenue liabilities of $100K–$200K are discovered late in the process and require significant price adjustments or deal restructuring.
This is the highest-risk scenario in a med spa acquisition and should be addressed explicitly in the LOI. The buyer faces both a clinical key-person dependency — patients follow their injector — and a regulatory continuity risk if the medical director relationship is personal rather than institutional. The LOI should require: (i) a minimum 90–180 day post-close transition period during which the seller remains under a written consulting or employment agreement; (ii) a transition plan for introducing the new provider team to existing patients; and (iii) a signed replacement medical director agreement as a condition of closing. Buyers should seriously consider earnout structures tied to patient retention in these situations rather than paying full price upfront.
Yes. Med spas are generally SBA 7(a) eligible as operating businesses with tangible cash flow, provided the buyer meets standard SBA eligibility requirements. However, the CPOM-compliant deal structure — particularly the separation of clinical and management entities — must be carefully structured to satisfy SBA lender requirements. Some lenders are unfamiliar with the MSA/PC structure common in med spa deals and may require additional legal documentation. Buyers should work with an SBA lender experienced in healthcare and aesthetics transactions. Typical SBA financing covers 70–80% of the purchase price, with a 10–20% buyer equity injection and a seller note covering the remainder.
Plan for 45–60 days minimum. Med spa due diligence requires review of state licensing and CPOM compliance, medical director agreements, individual provider contracts and non-competes, malpractice and regulatory history, equipment inventory and lease structures, deferred revenue reconciliation, and patient database metrics — in addition to standard financial and legal review. Deals that rush due diligence in 30 days or less on med spa acquisitions frequently encounter post-close surprises related to regulatory compliance, deferred revenue liability, or provider departure. Build in adequate time and retain advisors with healthcare transaction experience.
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