Letter of Intent Template for Acquiring a Pediatric Dental Practice

Parties and Practice Identification

Identifies the buyer entity, seller entity or individual, and the practice being acquired. In pediatric dental deals, the seller is often an individual dentist operating as a solo professional corporation or LLC. Buyers should specify whether they are purchasing as an individual, a newly formed entity, or an existing group entity, as this affects SBA loan structuring and Medicaid re-credentialing.

💡 Confirm the exact legal entity owning the practice assets before drafting. Medicaid provider numbers are tied to the individual dentist's NPI, not the practice entity — this distinction matters for credentialing continuity. If the buyer is a DSO, note that Medicaid contracts in many states cannot be assigned to a non-clinical corporate entity and will require re-credentialing under the acquiring dentist's NPI.

Transaction Structure

Defines whether the deal is structured as an asset purchase or equity purchase. Nearly all lower middle market pediatric dental acquisitions are structured as asset purchases, which allows the buyer to step up the tax basis of equipment and goodwill and avoid inheriting undisclosed liabilities. Equity purchases are rare and typically limited to DSO roll-up scenarios involving earnouts and equity rollovers.

💡 Explicitly excluding pre-closing accounts receivable is standard and expected by SBA lenders. If the seller insists on an equity sale to preserve installment sale tax treatment, consult a dental CPA immediately — the tax implications are materially different and the SBA may not finance an equity transaction in the same structure. For DSO deals involving equity rollover, the structure section must note the rollover percentage and vesting schedule in the LOI.

Purchase Price and Consideration

States the proposed total purchase price, how it is calculated, and how it will be paid. Pediatric dental practices in the $1M–$4M collection range typically trade at 3.5x–6x adjusted EBITDA, with multiples compressed for Medicaid-heavy practices and expanded for strong private-pay books with 1,000+ active patients. The LOI should specify any earnout component and its calculation basis.

💡 Sellers will push back on earnouts — most want certainty at close. Frame earnouts as shared upside protection for both parties given patient retention risk tied to ownership change. For Medicaid-heavy practices, tie earnout triggers explicitly to collections performance, not patient headcount, since reimbursement rates can shift. SBA lenders will scrutinize the goodwill-to-total-consideration ratio — goodwill above 70–75% of purchase price may require additional collateral or borrower equity injection of 10–15%.

Earnout Structure and Patient Retention Mechanics

Details the earnout calculation, measurement periods, and the seller's obligations to support patient retention during the transition. This section is critical in pediatric dental deals where a single retiring dentist may have built decades of personal relationships with families.

💡 Sellers may negotiate a floor — a minimum earnout payment even if collections dip slightly, to protect against buyer-caused disruptions (e.g., fee schedule changes, reduced hours). Buyers should resist this unless the floor is modest (under 50% of max earnout). Define 'collections' precisely — gross vs. net of adjustments and write-offs matters enormously in Medicaid practices where contractual adjustments can be 40–50% of gross production.

Due Diligence Period and Access

Establishes the length of the due diligence period, the types of information to be provided, and the confidentiality obligations of both parties. Pediatric dental due diligence is more complex than general dentistry due to sedation compliance, Medicaid billing history, and staff credentialing requirements.

💡 Request the active patient roster with aging data early — this is the single most important data point for validating goodwill. Ask for production broken out by procedure code category (preventive, restorative, sedation/anesthesia, orthodontic) to understand the revenue mix. Medicaid billing history should include any audit correspondence, recoupment demands, or compliance reviews in the past 5 years — these are material and often not volunteered.

Medicaid and Payer Contract Continuity

Addresses the treatment of existing payer contracts, including Medicaid/CHIP participation agreements, during and after the transition. This is one of the most operationally complex sections of a pediatric dental LOI and is frequently underdiscussed until due diligence is underway.

💡 Medicaid re-credentialing timelines vary by state and can run 60–120 days. In some states, a new owner cannot bill Medicaid at all until credentialed — this creates a real revenue gap risk. DSO buyers face additional complexity since Medicaid in many states requires a licensed dentist as the enrolled provider, not a corporate entity. Plan for this before LOI execution, not after. Consider escrowing 5–10% of purchase price until credentialing is complete.

Seller Transition and Associate Agreement

Outlines the seller's post-closing role as a clinical associate or consultant, the duration of the transition period, compensation during the transition, and the minimum time commitment expected per week. This section is particularly important in pediatric dental practices where the selling dentist has long-standing relationships with patient families.

💡 Sellers sometimes view the transition period as an obligation to minimize; buyers should treat it as one of the highest-value components of the deal. Negotiate a minimum day-per-week commitment (3–4 days is typical for the first 6 months) and tie any earnout to seller's active participation. If the seller is genuinely burning out, a 6-month transition at reduced days may be more realistic than a full-year commitment — be honest about this in LOI negotiation to avoid post-closing friction.

Non-Compete and Non-Solicitation

Specifies the geographic scope, duration, and covered activities of the seller's non-compete and non-solicitation obligations post-closing. Enforceability varies by state, and pediatric dental non-competes must be carefully scoped to be enforceable while adequately protecting the buyer's patient base.

💡 Non-compete enforceability is a state law issue — verify with local counsel before finalizing scope. In states like California, non-competes are nearly unenforceable except in the sale-of-business context, and even then, courts scrutinize geographic and duration scope. Sellers sometimes push for carve-outs (e.g., continuing to treat special needs patients they have long-standing relationships with) — consider whether a limited carve-out is worth the goodwill it generates vs. the leakage risk.

Exclusivity and No-Shop

Grants the buyer an exclusive negotiating period during which the seller agrees not to solicit, entertain, or accept offers from other buyers. This protects the buyer's investment in due diligence and prevents competitive bidding during the diligence window.

💡 60–75 days is the typical exclusivity window for a pediatric dental deal given credentialing complexity and SBA loan timelines. If the seller is represented by a broker, they will push for 45 days — negotiate to 60 as a minimum if you are SBA-financed, since lender approval alone can take 30–45 days. Do not waive exclusivity in exchange for other concessions — it is one of the LOI's most valuable buyer protections.

Conditions to Closing

Lists the material conditions that must be satisfied before the transaction can close, including financing, lease assignment, credentialing approvals, and regulatory clearances specific to pediatric dental practices.

💡 The lease condition is often the longest-lead item — engage the landlord early and separately from the APA negotiation. Medicaid practices often operate in strip mall or medical office settings where landlords are accustomed to dental tenants; however, lease assignment approval can take 30–60 days. The 'no material adverse change' clause should define what constitutes a MAC — typically a drop of more than 10–15% in monthly collections or the departure of a key clinical staff member.

Confidentiality and Announcements

Restricts both parties from disclosing the existence or terms of the transaction to staff, patients, payers, or competitors prior to a mutually agreed public announcement timeline. This is especially important in pediatric dental practices where staff and patient anxiety about ownership changes can cause attrition before the deal closes.

💡 Premature disclosure is one of the most common and damaging mistakes in dental acquisitions. A front-desk employee learning the practice is for sale can create a wave of staff departures and patient anxiety. Limit disclosure to the broker, CPA, attorney, and lender on each side. Brief the office manager and lead hygienist only after LOI execution and after a communication plan is in place — ideally at or near Closing.