Buying or selling a dental practice is a major milestone—one that often comes with excitement, nerves, and a long to-do list. And one of the early tasks on that list is the Letter of Intent. It’s easy to think of the LOI as just another formality, a necessary but routine step, before diving into the purchase agreement. However, that mindset can lead to delays, misunderstandings, and unnecessary stress for both parties.
A weak or vague LOI can create frustration and even cause a deal to collapse. That’s why it’s critical for both buyers and sellers to get it right from the start.
What Is a Letter of Intent?
A letter of intent, or LOI, is much more than a simple handshake agreement. It is an essential step in the purchase and sale of a dental practice.
The idea behind the LOI is to outline the nuts and bolts of the purchase agreement to come. While it’s not the final contract, it serves as the foundation for the entire transaction. A well-drafted LOI outlines the key terms of the sale, sets expectations for both buyer and seller and prevents surprises down the road. It establishes the major deal points—such as purchase price, payment terms, transition details, and due diligence timelines—before lawyers draft the final, binding agreement.
While an LOI is not a final sale agreement, buyers and sellers should remember that most LOIs contain binding and non-binding elements. Typically, sections relating to confidentiality and exclusivity will be binding, whereas the transition details may remain subject to final negotiation. Because of this hybrid nature, it’s essential to carefully review the LOI before signing. The goal is to create an LOI that protects both parties and ensures the sale moves forward smoothly—not one that leaves room for unnecessary disputes or surprises.
Key LOI Questions:
- Who are the parties?
- What is being bought (assets of a dental practice or shares of a dentistry professional corporation)?
- What is the purchase price?
- Will there be a deposit, and if so, how much?
- When is the transaction set to close?
- Will the seller be staying on afterward to associate at the practice?
- What will happen with the employees after the closing?
- Are there any conditions that must be met in order for the deal to go through?
- Will the buyer sign a new lease or will the existing lease be assigned?
- How can the parties terminate the agreement and what are the consequences of doing so?
Why Sellers Need a Strong LOI
For a dentist selling a practice, the LOI is an opportunity to lock in key deal terms early on, minimizing the risk of price renegotiations or unexpected delays. It allows the seller to establish clear expectations about what is included in the sale, such as patient records, equipment, and lease transfers, so there’s no confusion later.
Sellers also benefit from a well-defined exclusivity period in the LOI. This clause effectively prevents buyers from unnecessarily delaying the process, ensuring that the chosen buyer is serious and committed to closing the deal. However, sellers should be cautious—exclusivity periods should not be open-ended. A reasonable timeframe keeps the deal moving forward while protecting the seller from being locked into negotiations indefinitely.
Another critical consideration for sellers is transition planning. If a seller intends to stay on for a period after the sale—whether to assist with patient retention or to ease the new owner into the practice—this should be clearly outlined in the LOI. Too often, transition details are left vague, leading to last-minute disputes that could have been avoided with more precise upfront communication.
Why Buyers Need a Strong LOI
On the buyer’s side, the LOI plays an equally important role. A well-drafted LOI prevents the seller from raising the price or changing terms unexpectedly and ensures that all significant deal points are agreed upon before deeper due diligence begins. It also gives the buyer a structured timeline for reviewing financial records, assessing liabilities, and securing financing, allowing them to conduct their due diligence without unnecessary pressure.
Buyers should also pay close attention to contingencies in the LOI. These clauses protect them in case financing falls through, due diligence reveals issues or other unforeseen circumstances arise. While it’s understandable that a buyer may want to move quickly, rushing into an LOI without properly structuring contingencies can lead to serious financial and legal risks down the road.
For those using an LOI template provided by the seller, it’s crucial to carefully review the terms and understand what you’re agreeing to. There’s nothing wrong with starting from a seller’s LOI. Still, buyers should ensure that it’s not overly one-sided and that their interests—such as due diligence rights and financing contingencies—are properly protected. If there’s any uncertainty, legal guidance can prevent costly mistakes.
Common LOI Pitfalls—and How to Avoid Them
While every transaction is unique, certain mistakes tend to come up again and again in LOIs. The most common issues include:
- Vague language that leads to confusion and room for renegotiation. A strong LOI should be clear and precise, leaving little room for interpretation.
- Unrealistic timelines that put undue pressure on either party. A rushed process increases the risk of missing critical details.
- One-sided exclusivity clauses that unfairly restrict one party’s ability to explore alternatives. Exclusivity should be reasonable and time-limited.
- Failure to specify due diligence rights, leading to buyers not getting full access to necessary financials, leases, and legal documents until it’s too late.
A well-drafted LOI can prevent these pitfalls and create a smoother, more predictable transaction for both sides.
How DMC Helps You Get the LOI Right
At DMC LLP, we have helped countless dentists buy and sell practices with confidence. Our expertise ensures that LOIs are structured to protect both buyers and sellers, minimizing risk and avoiding unnecessary disputes. We focus on:
- Drafting LOIs that are clear, fair, and legally sound.
- Ensuring financial and legal protections are in place from the start.
- Negotiating reasonable terms that prevent last-minute complications.
- Working with lenders, accountants, and advisors to keep deals on track.
A professionally crafted LOI isn’t just about securing a deal—it’s about setting the stage for a successful transition. It provides clarity, ensures alignment, and helps maintain momentum in what can otherwise be a lengthy and complex process.
Bottom Line
Whether you are buying or selling a dental practice, the LOI is your first opportunity to establish trust, prevent surprises, and create a roadmap for a successful transaction. Taking the time to get it right will reduce stress, prevent delays, and keep everyone aligned throughout the process.
Before signing an LOI, make sure you understand the terms and what is binding vs. non-binding. At DMC, we help dentists navigate this process with confidence. If you’re about to sign an LOI—or need one drafted—let’s talk. A little legal guidance now can save you time, money, and headaches later.
Let’s make sure your deal starts off right. Contact DMC today for experienced, practical legal support that sets your transaction up for success.
