Structure your offer to acquire a licensed memory care facility with confidence — covering purchase price, licensing contingencies, staffing protections, real estate terms, and state survey compliance in a single, defensible letter of intent.
A Letter of Intent (LOI) for a memory care facility acquisition is more than a price proposal — it is the foundational document that establishes the deal structure, protects the buyer during due diligence, and signals to the seller that you understand the operational and regulatory complexity of dementia care. Memory care transactions in the $1M–$5M revenue range involve unique risk factors that must be addressed explicitly in the LOI: state licensing continuity, survey deficiency history, resident census protections, staffing ratios, real estate or lease terms, and payer mix verification. Unlike a standard business acquisition, the LOI must acknowledge that the asset being transferred includes a licensed healthcare operation serving a vulnerable population, where regulatory compliance and care continuity carry legal and reputational weight far beyond the financial statements. Whether you are pursuing an asset purchase with SBA 7(a) financing, a stock purchase to preserve existing Medicaid provider agreements, or a PropCo/OpCo structure with a real estate investor, your LOI sets the tone for every subsequent negotiation. This guide walks through each section of a memory care-specific LOI with example language, negotiation notes, and the key terms that experienced buyers and sellers focus on in this sector.
Find Memory Care Facility Businesses to Acquire1. Identification of Parties and Facility
Clearly identify the buyer entity, the seller entity, and the specific licensed facility being acquired, including the facility's state license number, licensed bed capacity, and physical address. If real estate is included, identify the property parcel separately from the operational business.
Example Language
This Letter of Intent is submitted by [Buyer Entity Name], a [State] limited liability company ('Buyer'), to [Seller Entity Name] ('Seller'), the licensed operator of [Facility Name], a [State]-licensed memory care facility located at [Address], holding State License No. [XXXXX] for [XX] licensed memory care beds ('the Facility'). This LOI contemplates the acquisition of substantially all operating assets of the Facility, including, subject to further negotiation, the real property located at the above address.
💡 Always reference the state license number and licensed bed count in the LOI. This creates a clear scope of what is being acquired and becomes the baseline for regulatory transfer filings. If the seller owns multiple beds across multiple wings or licenses, define exactly which beds and licenses are included. Buyers pursuing a PropCo/OpCo structure should identify the real estate and operating assets separately in this section from the outset.
2. Proposed Purchase Price and Deal Structure
State the proposed total enterprise value, the allocation between operating assets and real estate if applicable, the financing sources, and the seller carry component. Memory care facilities in the $1M–$5M revenue range typically trade at 4x–7x EBITDA, with purchase prices ranging from $1.5M to $10M+ depending on census, payer mix, and real estate inclusion.
Example Language
Buyer proposes to acquire the Facility for a total purchase price of $[X,XXX,000] ('Purchase Price'), allocated as follows: (a) $[X,XXX,000] for the operating assets of the Facility, including goodwill, equipment, resident agreements, and intangible assets; and (b) $[X,XXX,000] for the real property and improvements. The Purchase Price assumes trailing twelve-month EBITDA of approximately $[XXX,000] as represented by Seller's financial statements. Buyer intends to finance the acquisition through a combination of SBA 7(a) financing (approximately [XX]% of Purchase Price), a seller note representing [10–15]% of Purchase Price subordinated to SBA lender requirements, and Buyer equity. The seller note shall bear interest at [X]% per annum with a [5]-year amortization and shall be subject to SBA standby provisions.
💡 Memory care sellers often have limited financial reporting sophistication, so anchoring the LOI purchase price to a stated EBITDA figure with a clear add-back methodology protects the buyer if financial restatements occur during due diligence. The seller note is often essential for SBA deals — most SBA lenders require 10% seller carry when the buyer's equity injection is at the minimum. Negotiate the seller note carefully: include a provision that the note is subject to reduction or offset for undisclosed liabilities discovered during due diligence, particularly unresolved survey deficiencies or pending regulatory sanctions.
3. Asset Purchase vs. Stock Purchase Election
Specify whether the transaction is structured as an asset purchase or a stock purchase, and explain the rationale. In memory care, stock purchases are sometimes preferred to preserve existing Medicaid provider agreements or state operating licenses that would otherwise require re-application.
Example Language
The parties contemplate this transaction as an [Asset Purchase / Stock Purchase] of [Seller Entity Name]. Buyer's preference for an asset purchase is driven by the desire to limit assumption of historical liabilities; however, Buyer acknowledges that preservation of Seller's existing Medicaid provider agreement with the [State] Department of Health and Human Services and the current state operating license may require a stock purchase or change-of-ownership (CHOW) application process. The parties agree to cooperate in determining the optimal structure during the due diligence period, with final structure subject to confirmation from [State] licensing authorities and Medicaid program officials regarding provider agreement transferability.
💡 This is one of the most consequential structural decisions in a memory care deal. An asset purchase provides cleaner liability protection but may require the buyer to reapply for the state operating license and Medicaid provider number, creating a gap period where the facility cannot bill Medicaid — potentially a significant cash flow risk if Medicaid represents any portion of the payer mix. Buyers should obtain a written pre-determination from state licensing authorities before finalizing structure. Sellers should push for stock purchase if their Medicaid certification is current and in good standing, as this simplifies the transition.
4. Due Diligence Period and Access
Define the length of the due diligence period, what information the seller must provide, and how buyer access to the facility, staff, and residents will be managed. Memory care due diligence requires special sensitivity given the vulnerable resident population and the need for confidentiality.
Example Language
Buyer shall have a period of sixty (60) days from the execution of this LOI ('Due Diligence Period') to conduct a full review of the Facility's operations, financials, regulatory history, and physical plant. Seller shall make available within ten (10) business days of LOI execution: (a) three years of accrual-basis financial statements and trailing twelve-month management accounts; (b) all state survey reports, deficiency notices, corrective action plans, and inspection results for the past five (5) years; (c) current census report by payer type including average daily rates; (d) staffing schedules, turnover reports, and employee certifications; (e) all resident care agreements and rate schedules; (f) real estate documents including deed, lease, zoning approvals, and certificate of occupancy; and (g) copies of all insurance policies including professional liability and general liability. Buyer's access to the Facility for physical inspection shall be conducted at mutually agreed times with adequate notice to minimize disruption to residents and staff, and Buyer agrees to maintain strict confidentiality regarding the proposed transaction.
💡 Sixty days is the minimum recommended due diligence period for a memory care facility — licensing verification and physical plant assessments often take longer than expected. Request the state survey history up front; any Class A deficiencies, immediate jeopardy findings, or pending enforcement actions discovered late can collapse deals and waste significant time. Insist on direct access to the facility administrator and Director of Nursing for candid operational conversations, ideally after an NDA is signed but before the due diligence period formally begins. Sellers should negotiate for buyer access to be escorted and for resident and family identity information to be redacted until a definitive agreement is signed.
5. Regulatory and Licensing Contingencies
State the conditions related to state licensing, Medicaid certification, and change-of-ownership approval that must be satisfied before closing. These are non-negotiable in memory care transactions and should be explicitly named as closing conditions in the LOI.
Example Language
This transaction is contingent upon: (a) Buyer receiving approval of, or confirmation of transferability of, the [State] memory care operating license issued to Seller, or Buyer's successful submission of a new license application or change-of-ownership application acceptable to [State] Department of [Health/Social Services]; (b) no material adverse change in the Facility's survey status or regulatory standing between LOI execution and closing, including the absence of any new Class A deficiency findings, license probation, or enforcement action; (c) confirmation from [State] Medicaid program that Seller's provider agreement is in good standing and transferable, or that Buyer may enroll as a new Medicaid provider without interruption of resident benefits; and (d) Seller's maintenance of current occupancy levels within [5]% of the census reflected in due diligence materials through the closing date.
💡 Never omit the regulatory contingency in a memory care LOI — failure to transfer the operating license is a deal-killing event that can strand both parties. The census protection clause (maintaining occupancy within 5% of due diligence levels) is critical because sellers sometimes allow census to erode during a long sale process, particularly if they stop marketing to new families. Buyers should also include a contingency that no new residents with acute behavioral or medical needs outside the facility's current care capabilities are admitted between LOI and closing, as acuity creep can materially change staffing and liability profiles.
6. Real Estate Terms
Address whether real estate is included in the purchase price, the terms of any lease-back arrangement if real estate is sold separately, or the terms of an existing lease being assumed. Many memory care transactions separate the real estate into a PropCo/OpCo structure.
Example Language
If real estate is included: The Purchase Price includes the real property and all improvements, fixtures, and dementia-specific safety infrastructure at the Facility address. Buyer shall obtain an independent appraisal and Phase I environmental assessment of the property within thirty (30) days of LOI execution, the cost of which shall be borne by Buyer. If real estate is excluded / leased: Buyer's obligation to close is contingent upon executing a long-term triple-net lease for the Facility premises on terms acceptable to Buyer and Buyer's SBA lender, with a minimum initial lease term of [10] years, [two] [5]-year renewal options, annual rent escalators not exceeding [3]% or CPI (whichever is lower), and Seller's representation that the lease terms are acceptable to and approved by any existing mortgage lender on the property.
💡 Real estate is frequently the largest single asset in a memory care acquisition, often representing 40–60% of total deal value. SBA 7(a) lenders require that real estate included in the deal be appraised and that any lease have a term at least equal to the loan term (typically 10 years). If pursuing a PropCo/OpCo structure, the lease terms must be modeled carefully — overly aggressive rents imposed by a real estate investor can make the operating company non-viable even with strong census. Sellers retaining real estate and leasing back should negotiate for inflation-linked rent escalators and personal guarantee limitations.
7. Staffing Protections and Transition Period
Address the seller's obligations to retain key staff through closing, the transition period during which the seller will assist the buyer in operational onboarding, and any employment commitments made to the facility administrator or Director of Nursing.
Example Language
Seller agrees to use commercially reasonable efforts to retain all current care staff, including the Facility Administrator and Director of Nursing, through the closing date. Seller shall not, without Buyer's prior written consent, materially change the compensation, benefits, or employment terms of any employee with direct resident care responsibilities. Seller shall provide Buyer with [sixty (60)] days of post-closing transition support, including introductions to all family members, referral sources, hospital discharge planners, and local physicians. Buyer intends to offer continued employment to the Facility Administrator and Director of Nursing on terms to be negotiated separately, and Seller acknowledges that retention of these individuals is a material condition of Buyer's investment thesis.
💡 Staffing is the most operationally sensitive element of a memory care acquisition. An abrupt departure of the facility administrator or Director of Nursing can trigger a state licensing review, destabilize the resident population, and alarm families — any of which can cause census decline that permanently impairs facility value post-acquisition. Buyers should consider placing a key-person retention bonus in escrow at closing, funded from the purchase price, payable to the administrator and DON at 12 months post-closing if they remain employed. Sellers should negotiate to have the transition period compensation and expenses paid by the buyer.
8. Exclusivity and No-Shop Period
Establish a period during which the seller agrees not to solicit or entertain competing offers, giving the buyer time to complete due diligence and finalize financing without competitive interference.
Example Language
In consideration of Buyer's investment of time and resources in due diligence and financing activities, Seller agrees that for a period of ninety (90) days from the execution of this LOI ('Exclusivity Period'), Seller shall not, directly or through any broker, agent, or representative, solicit, encourage, or enter into discussions with any other party regarding the sale, recapitalization, or transfer of the Facility or any material portion of its assets. Seller shall promptly notify Buyer in writing if any unsolicited offer is received during the Exclusivity Period.
💡 Ninety days of exclusivity is reasonable for a memory care deal given the complexity of regulatory contingencies, SBA financing timelines (which typically require 60–90 days to commit), and physical plant assessments. Sellers should push back on exclusivity periods exceeding 90 days unless the buyer provides a meaningful earnest money deposit. Buyers should negotiate a right to extend exclusivity by an additional 30 days if the state licensing change-of-ownership process is pending and outside the buyer's control. Sellers with multiple interested parties should use the LOI process competitively before granting exclusivity to the preferred buyer.
9. Earnest Money Deposit
Specify the earnest money amount, the escrow agent, the conditions under which the deposit is refundable to the buyer, and the conditions under which it is forfeited to the seller.
Example Language
Within five (5) business days of LOI execution, Buyer shall deposit $[XX,000] ('Earnest Money') with [Escrow Agent Name] as a good-faith deposit. The Earnest Money shall be fully refundable to Buyer if: (a) Buyer terminates this LOI during the Due Diligence Period for any reason; (b) any regulatory contingency set forth in Section 5 cannot be satisfied; or (c) the parties fail to execute a definitive purchase agreement within [120] days of this LOI. The Earnest Money shall be applied toward the Purchase Price at closing or forfeited to Seller if Buyer fails to close for reasons other than an unsatisfied contingency or Seller default.
💡 For memory care deals in the $2M–$5M range, earnest money deposits typically range from $25,000 to $75,000. Sellers should negotiate for a portion of the deposit to become non-refundable after the due diligence period ends if the buyer proceeds to definitive agreement but later fails to close for financing reasons. Buyers should ensure the deposit is fully refundable through the end of the due diligence period — healthcare regulatory complexity creates legitimate reasons for withdrawal that should not result in deposit forfeiture.
10. Confidentiality and Resident Privacy
Establish the buyer's obligations to protect seller confidential information, and specifically address HIPAA compliance in handling any resident health information encountered during due diligence.
Example Language
Buyer agrees to maintain strict confidentiality regarding the proposed transaction, the financial and operational information provided by Seller, and the identity of the Facility. Buyer acknowledges that any resident health information or personal identifying information encountered during due diligence constitutes Protected Health Information under HIPAA and agrees to execute a Business Associate Agreement with Seller prior to receiving any such information. Buyer shall limit disclosure of transaction information to its attorneys, accountants, lenders, and advisors on a need-to-know basis, and shall require all such persons to be bound by confidentiality obligations equivalent to those set forth herein.
💡 HIPAA compliance is non-negotiable in a memory care due diligence process. Buyers should be prepared to sign a Business Associate Agreement before reviewing any census data that includes resident-identifiable information. Sellers should redact resident names and identifying information from financial reports wherever possible, sharing only aggregated census data in early due diligence. Breaches of confidentiality in a memory care sale can have devastating consequences for resident families, staff morale, and community reputation — both parties have strong incentives to maintain tight confidentiality controls.
Purchase Price Adjustment for Survey Deficiencies
Negotiate a purchase price reduction mechanism triggered by the discovery of undisclosed Class A deficiencies, pending enforcement actions, or corrective action plans that materially increase post-closing regulatory compliance costs. A standard provision might allow Buyer to reduce the purchase price by 1x–2x the estimated remediation cost for each unresolved deficiency discovered during due diligence, or to terminate the LOI entirely if a new immediate jeopardy finding occurs before closing.
Payer Mix Representation and Warranty
Require the seller to warrant in the definitive agreement that the payer mix breakdown — specifically the private-pay percentage, Medicaid census, and average daily rates by payer — is accurate as of the due diligence data date and has not materially changed. A private-pay percentage that drops from 65% to 45% between LOI and closing can reduce EBITDA by $200,000 or more, fundamentally altering deal economics.
Change-of-Ownership Application Timeline and Risk Allocation
Negotiate which party bears the cost and delay risk if the state CHOW process extends beyond the expected timeline. In some states, memory care CHOW applications take 90–180 days, and both parties need clarity on who covers operating costs, who retains revenues, and what happens to earnest money if regulatory delays push closing past agreed deadlines.
Real Estate Condition and CapEx Escrow
If the physical plant inspection reveals deferred maintenance, aging mechanical systems, or dementia-specific safety features (wander guard systems, secured egress doors, enclosed courtyards) that require capital investment, negotiate an escrow holdback from the purchase price — typically $50,000–$200,000 — to fund identified capital expenditures, with release conditions tied to completion of improvements and seller representations about known deficiencies.
Non-Compete and Non-Solicitation Scope
For founder-operators, negotiate a non-compete covering the relevant geographic market — typically a 15–25 mile radius from the facility — for a period of 3–5 years post-closing. In memory care, also negotiate a non-solicitation clause preventing the seller from recruiting current staff or reaching out to the families of current residents to market any competing care service. SBA lenders typically require a non-compete from all sellers with 20%+ ownership.
Indemnification Caps and Survival Periods for Regulatory Liabilities
Negotiate the scope of seller indemnification for pre-closing regulatory liabilities, including pending or threatened state enforcement actions, Medicaid billing audits, and resident family complaints or litigation. In memory care, survival periods for regulatory indemnification should extend at least 3 years post-closing, given that state surveys and Medicaid audits can surface issues dating back 2–3 years prior to the audit date. Cap the indemnification at 100% of purchase price for regulatory matters and 15–20% for general representations and warranties.
Find Memory Care Facility Businesses to Acquire
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Most sections of a memory care LOI are intentionally non-binding — the purchase price, deal structure, and due diligence findings are subject to change based on what the buyer discovers. However, certain provisions are typically made binding: the exclusivity or no-shop period, the confidentiality and HIPAA obligations, the earnest money deposit terms, and any cost allocation agreements for due diligence expenses. The LOI should explicitly state which sections are binding and which are not. Given the regulatory sensitivity of memory care — where premature disclosure can harm staff morale, resident families, and referral relationships — the binding confidentiality provisions are especially important and should be drafted with care.
A minimum of 60 days is recommended, with 90 days preferred for acquisitions involving state licensing change-of-ownership applications, real estate due diligence, or Medicaid provider agreement verification. Memory care due diligence is more time-intensive than most business acquisitions because it requires reviewing five years of state survey history, verifying staff certifications and turnover rates, commissioning a physical plant inspection that includes life safety code compliance and dementia-specific design features, and engaging with state licensing authorities about CHOW timelines. SBA lenders also need time to underwrite the deal, which typically requires 60–75 days after receipt of a complete application package.
This is one of the most consequential decisions in a memory care acquisition and should be addressed early in the LOI. An asset purchase provides cleaner liability protection and a stepped-up cost basis for tax purposes, but requires re-application for the state operating license and may disrupt the Medicaid provider agreement, creating a billing gap that can cost the facility significant revenue. A stock purchase preserves the existing license and Medicaid enrollment but transfers historical liabilities, including prior survey deficiencies, undisclosed family complaints, and any pending billing audits. In most memory care deals, the optimal structure depends on the state's CHOW policies and the importance of Medicaid continuity to the facility's cash flow. Consult with a healthcare attorney familiar with your state's licensing requirements before finalizing the LOI structure.
Memory care facilities in the lower middle market typically transact at 4x–7x adjusted EBITDA, with the multiple driven by four primary factors: occupancy stability (facilities consistently above 85% command premium multiples), private-pay mix (50%+ private pay significantly expands the buyer pool and multiple), regulatory cleanliness (no Class A deficiencies or pending enforcement actions), and whether real estate is included. A well-run 30-bed facility with $1.5M revenue, 88% occupancy, 70% private pay, clean survey history, and real estate included might justify a 6x–7x EBITDA multiple. A similar facility with 60% Medicaid census, recent deficiency findings, and a short-term lease would trade at 4x–5x at best. SBA financing availability at these deal sizes supports seller price expectations, as buyers can access up to $5M in SBA 7(a) financing for acquisitions of this type.
Residents with dementia are among the most vulnerable to disruption from environmental and caregiving changes, so continuity of care is both an ethical obligation and a regulatory requirement during a memory care ownership transfer. State licensing authorities typically require notification to residents and their responsible parties (family members or legal guardians) of the pending ownership change, often 30–60 days in advance of the effective date. Most states also require the incoming operator to demonstrate adequate staffing and a care plan continuity protocol as part of the CHOW approval. Buyers should include provisions in the LOI — and later in the definitive agreement — that the seller will cooperate in resident and family notifications, that existing care plans will be maintained through a transition period, and that the seller will not discharge or transfer residents in anticipation of the sale. The LOI should also address how move-in agreements and rate schedules will be honored for existing residents post-closing.
Yes, memory care facilities are eligible for SBA 7(a) financing when structured as an operating business acquisition, and the LOI should reflect the financing contingency explicitly. SBA 7(a) loans can fund up to $5 million for acquisitions of this type, covering goodwill, equipment, working capital, and real estate if included. The LOI should state that closing is contingent on Buyer securing SBA financing commitments on terms acceptable to Buyer, and should include the seller note as a subordinated component (typically 10–15% of purchase price) consistent with SBA standby requirements. SBA lenders will require the seller's three years of financial statements, a business valuation, a real estate appraisal if property is included, and a non-compete agreement from all sellers with 20%+ ownership. Including the seller note and SBA financing structure in the LOI signals sophistication to the seller and reduces the likelihood of financing contingency disputes later in the process.
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