Happy Friday! Hope you’ve had a productive week.
We often tell practice owners: The Purchase Agreement is 50+ pages of legal jargon, but the Letter of Intent (LOI) is where the money is actually made.
Most practice owners scan the LOI for two things:
Top-line price (e.g., "$10M")
Cash at close
But after 15+ years of advising dental, med spa, and surgical practices, we know the "boring" clauses are where you actually lose money.
Buyers love it when sellers gloss over these.
Here are the 8 terms you need to clarify before you sign exclusivity.
1. Exclusivity (The "No-Shop" Clause)
The Trap: Signing a 120-day exclusivity period with no way out. If the buyer drags their feet or changes the deal, you’re stuck.
The Fix: Keep it to 60–90 days. Demand a "break" clause if the buyer lowers the price or misses diligence milestones.
2. "Enterprise Value" vs. "Cash Free, Debt Free"
The Trap: You think you’re getting $5M. But the buyer defines "Working Capital" aggressively, forcing you to leave $200k of cash in the business to cover "operating needs."
The Fix: Define the Working Capital target in the LOI. Don’t leave it for the lawyers to fight over later.
3. The Non-Compete (Scope & Geography)
The Trap: You sell your med spa in Miami, but the non-compete says you can’t own any aesthetic business in "all of Florida" for 5 years.
The Fix: Limit it to a specific radius (e.g., 10 miles) and specific services. If you’re a vascular surgeon, ensure you can still practice in non-competing contexts (like a hospital).
4. Provider Employment Agreements
The Trap: The sale price is great, but your post-sale salary is 30% lower than what you take home now, and the "production bonus" is vague.
The Fix: Agree on your post-close compensation (salary, commission % of collections) now. Don't kick the can down the road.
5. "Rollover Equity" Rights
The Trap: You roll $2M into the buyer’s platform. But you have no voting rights, no distribution priority, and no clue when you can actually sell that stock.
The Fix: Ask for "Tag-Along Rights" (if they sell, you get to sell) and "Put Options" (ability to cash out after X years).
6. Indemnification Caps (The "Clawback")
The Trap: If the buyer finds a billing error 2 years from now, can they take back all your money?
The Fix: Cap your liability. Market standard for healthcare deals is often 10–20% of the purchase price, not the full amount (except for fraud).
7. Earnout Metrics
The Trap: Your earnout depends on EBITDA. But post-close, the buyer doubles your corporate overhead allocation, crushing your EBITDA and killing your earnout.
The Fix: Define "Adjusted EBITDA" in the LOI. Exclude corporate management fees and one-time integration costs from the calculation.
8. Retaining "Clinical Autonomy"
The Trap: Especially for dentists and surgeons—the buyer starts dictating lab choices, scheduling density, or treatment protocols.
The Fix: Add a clause explicitly preserving your clinical decision-making authority.
The Bottom Line:
An LOI isn't just a "handshake."
It’s the blueprint for your exit. If the blueprint is flawed, the house will be expensive to fix.
Before you sign anything, get a second set of eyes on it.
[Schedule a Deal Structure Review Below]
Keep winning,
Viper Partners
Seller-Exclusive Healthcare M&A