Letter of Intent Template for Acquiring an Occupational Therapy Clinic

Parties and Transaction Overview

Identifies the buyer entity, seller, and the clinic being acquired. Establishes whether this is an asset purchase or equity purchase, which has significant implications for payor contract continuity, Stark Law compliance, and liability assumption in occupational therapy clinic deals.

💡 Sellers in OT clinic deals frequently prefer an equity sale to avoid triggering payor credentialing re-enrollment, which can cause a 60–120 day gap in insurance billing. Buyers typically prefer an asset purchase to avoid inheriting unknown billing compliance liabilities or unresolved payer audits. Clarify early whether payor contracts are assignable under the existing agreement terms — many commercial payer contracts require written consent for assignment. This structural question should be resolved before the LOI is signed, not during due diligence.

Purchase Price and Valuation Basis

States the proposed total purchase price, the valuation methodology used (typically an EBITDA multiple), and how the price may be adjusted based on due diligence findings related to payor mix, therapist retention, or normalized earnings.

💡 OT clinic sellers often present revenue figures that include their own clinical production, which inflates EBITDA and creates a non-transferable revenue problem. Buyers should build in language that normalizes EBITDA by replacing owner clinical production with a market-rate therapist salary ($65,000–$90,000 annually for a full-time OT) before applying the multiple. Valuation multiples for outpatient OT clinics in this market range from 3.5x to 6x EBITDA, with the higher end reserved for multi-therapist clinics with diversified payor mix, specialty programs, and documented physician referral pipelines.

Deal Structure and Financing

Describes how the purchase price will be funded across SBA debt, seller financing, earnout, and equity injection, and outlines any conditions tied to SBA lender approval or seller note subordination requirements.

💡 Most owner-operator OT clinic sellers are unfamiliar with SBA standby note requirements, which prohibit any payments on the seller note during the SBA loan term unless the seller is still employed by the business. Educate the seller early on this restriction to avoid friction at closing. If the seller needs liquidity at close, structure a larger cash component funded by the SBA loan rather than relying on seller note payments. For SBA eligibility, confirm the clinic is not majority-owned by a passive investor and that all operating entities are structured as for-profit businesses.

Earnout Provisions

Defines performance-based payments tied to post-close patient volume retention, therapist employment continuity, or revenue thresholds — a common mechanism in OT clinic deals where the seller's relationships and clinical production are central to business value.

💡 Earnouts are the single most negotiated term in OT clinic acquisitions. Sellers want earnouts tied to metrics they can influence — such as maintaining their referral relationships during a transition period — while buyers want protections against reimbursement rate drops or therapist departures outside the seller's control. Define clearly whether the earnout is measured on gross revenue, net collections, or EBITDA, and who bears responsibility for payor rate changes that occur post-close. Avoid earnout structures that create perverse incentives for the seller to delay billing or defer collections to manipulate measurement periods.

Due Diligence Period and Access

Establishes the timeframe, scope, and logistics of buyer due diligence, including access to financial records, payor contracts, therapist credentialing files, patient census data, and regulatory compliance documentation specific to OT clinic operations.

💡 Sellers are often hesitant to share therapist employment files and referral source data early in due diligence, fearing that buyers will approach referral partners or recruit staff before closing. Use a robust non-disclosure and non-solicitation agreement signed before the LOI to address this concern. Payor contract review is non-negotiable — buyers must confirm that major commercial contracts are assignable or transferable and that the clinic is not under a corrective action plan or prepayment review with any payer. Budget for at least 10–15 hours of healthcare attorney time to review billing compliance history and Stark Law exposure during the due diligence period.

Exclusivity and No-Shop Period

Grants the buyer an exclusive negotiating window during which the seller agrees not to solicit, entertain, or advance discussions with other potential acquirers — critical protection given the time and cost investment required for OT clinic due diligence.

💡 Sixty days is standard for OT clinic acquisitions given the complexity of payor contract review and therapist credentialing verification. If SBA financing is involved, request an option to extend exclusivity by an additional 30 days if the lender's underwriting timeline extends beyond the initial period — SBA lender delays are common in healthcare acquisitions due to additional regulatory review requirements. Sellers represented by brokers may push back on exclusivity periods longer than 45 days if the deal has not advanced materially by that point.

Representations and Pre-Close Covenants

Outlines the seller's key representations about the business and the operational covenants they agree to maintain during the period between LOI signing and closing — including therapist retention, billing practices, and payor contract maintenance.

💡 The pre-close covenant around therapist retention is particularly important — OT clinic staff departures between LOI and closing can materially reduce the value of the business before the buyer takes control. Consider including a provision that triggers a purchase price reduction or buyer termination right if a therapist generating more than 15% of clinic revenue provides resignation notice before closing. Also confirm that the seller is not planning to introduce new service lines, sign new leases, or make capital expenditures above a defined threshold without buyer consent during the pre-close period.

Conditions to Closing

Lists the specific conditions that must be satisfied before the transaction can close, including SBA loan approval, payor contract assignments, regulatory approvals, and therapist employment agreement execution.

💡 Payor contract assignment is the most frequently delayed closing condition in OT clinic deals. Commercial insurers can take 30–90 days to process assignment or credentialing requests, and some contracts require the buyer entity to re-credential independently rather than accepting an assignment. Begin payor contract transfer communications as early as legally permissible — ideally immediately after LOI execution with seller consent. Structure a provisional billing arrangement or management services agreement to bridge any credentialing gap that would otherwise interrupt cash flow at closing.

Confidentiality and Non-Solicitation

Confirms that both parties are bound by confidentiality obligations and that the buyer will not directly solicit the seller's therapists, referral sources, or patients if the transaction does not close.

💡 Seller-side advisors will push hard for robust non-solicitation provisions because the therapist team and referral relationships are the crown jewels of an OT clinic. Buyers should agree to reasonable non-solicitation terms covering the due diligence period and a defined post-termination window — but resist overly broad provisions that would prevent the buyer from hiring therapists who independently respond to public job postings or from competing in the general market. Specify that non-solicitation applies only to contacts made using information obtained through the due diligence process.

Termination Rights

Specifies the conditions under which either party may terminate the LOI without liability, and clarifies which provisions survive termination — typically confidentiality, non-solicitation, and exclusivity obligations already incurred.

💡 Make termination rights reciprocal and clearly defined. Sellers sometimes attempt to add a break-up fee payable by the buyer if the buyer terminates without cause — in lower middle market OT clinic deals, a break-up fee of $10,000–$25,000 to cover seller's legal and advisor costs may be reasonable if the seller has removed the practice from market for an extended exclusivity period. Buyers should resist any break-up fee structure if the termination right is triggered by a due diligence finding rather than a change of heart.