A large-scale dental acquisition can shape the next decade of your professional life. And it often comes down to a document most people treat as a formality. The letter of intent, or LOI, is the first formal step in any dental merger or acquisition. Yet, it is also one of the most misunderstood. Dentists and group practice owners often sign LOIs without fully knowing which provisions are already binding, what leverage they are giving up, and how the language in this early document can limit every negotiation that follows.
At Mandelbaum Barrett PC, our National Dental Law Group has guided clients through some of the most complex dental mergers and acquisitions in the country, from multi-location group practice sales to large DSO transactions spanning multiple states. The decisions made before the final purchase agreement is signed are often the ones that matter most.
What an LOI Actually Does
An LOI, sometimes called a term sheet or memorandum of understanding, is a preliminary agreement that lays out the basic terms of a proposed dental practice transaction. It covers key deal points such as the proposed purchase price, the structure of the deal (asset sale vs. equity sale), the timeline for due diligence, and any transition arrangements for the selling dentist.
Binding vs. Non-Binding Provisions
The LOI sits in a unique legal space. It is not a full contract, but it is more than a handshake. Most provisions in a dental LOI are non-binding, meaning either party can walk away before the final purchase agreement is signed. However, certain clauses are typically binding from the moment both parties sign, and these deserve close attention.
Confidentiality clauses prevent either party from sharing the terms or existence of the deal with outside parties. Exclusivity provisions, often called “no-shop” clauses, require the seller to stop all discussions with other potential buyers for a set period, commonly 30 to 90 days. This exclusivity window is the buyer’s time to conduct due diligence. A legal column published in the Journal of the Michigan Dental Association has noted that assembling a team of legal and financial advisors is essential when structuring a dental practice sale.
Why Large-Scale Deals Demand Greater Scrutiny
When a dental M&A transaction involves a DSO acquirer, the deal’s complexity and long-term implications make careful preparation essential. The seller, by contrast, may be doing this for the first time, or at most once or twice in a career.
That gap matters. A DSO’s LOI will be drafted by experienced transactional attorneys and written to favor the buyer. Knowing the four-phase DSO transaction process before signing an LOI allows sellers to negotiate from an informed position rather than reacting to terms that have already been set.
Key LOI Provisions to Negotiate Before You Sign
Sellers in large-scale transactions should pay close attention to the following provisions before putting pen to paper:
- Purchase price and structure: The LOI should clearly define whether the deal is an asset sale or equity sale, as this has significant tax implications for the seller.
- Earn-out arrangements: Many DSO transactions include earn-out components tied to future performance. The baseline metrics for these earn-outs should be defined carefully.
- Exclusivity period length: A shorter exclusivity window gives the seller more flexibility if the deal falls through.
- Transition and employment terms: If the selling dentist will continue practicing after closing, the LOI should outline the duration and pay structure of any post-closing employment.
Negotiating these terms before the LOI is signed preserves leverage that is very hard to recover later.
The Cost of Getting It Wrong
Sellers who treat the LOI as a simple formality often find themselves locked into deal terms they did not fully understand. Once exclusivity begins, the seller’s ability to negotiate is greatly reduced. The buyer knows there are no competing offers on the table. Deposit provisions, which may be non-refundable under certain conditions, can also create pressure to push forward even when due diligence reveals unfavorable information.
In large multi-location transactions, the risk is even greater. A poorly drafted LOI can leave significant value on the table, fail to protect your staff and patient base, or include confidentiality language so broad that it limits your future business opportunities. Our team has helped many sellers close dental practice transitions smoothly by getting involved before the LOI stage, not after.
Contact Mandelbaum Barrett PC for Dental M&A Counsel
At Mandelbaum Barrett PC, our National Dental Law Group brings decades of transactional experience to every dental acquisition we handle. Our attorneys have represented sellers, buyers, and group practices in complex DSO transactions across the country. We are well-positioned to evaluate LOI terms, identify unfavorable provisions, and negotiate the protections our clients need before they sign anything.
Whether you are preparing to go to market with a multi-location group practice or reviewing your first DSO offer, the time to involve legal counsel is before the letter of intent is on the table, not after. Contact us today to speak with a member of our National Dental Law Group.