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13 Items that Most Letters of Intent Should Address



You’ve located a practice that you really like. The location is sound. The seller seems nice. The practice looks beautiful. The financials look good and your lender seems optimistic about lending on this practice. The seller’s broker recommends that you either sign their form “LOI” or that you work with your attorney to draft one for you. What happens next?


As one of our clients so lovingly said, “I hate when lawyers say abbreviations thinking we know what it means!” So, first: what is an “LOI”? A Letter of Intent (“LOI”) should be designed as a mere expression of good faith and intent for the parties to enter into continued negotiations as they navigate further into the acquisition process. By design, the thought process behind an LOI is that there will be certain, basic terms that the parties will pre-agree to avoid further negotiation on these business terms. While the LOI should traditionally state in clear terms that it is “non-binding”, that is not always the case if that is not what the parties intend to do.


Here are our top 13 items that most strong LOIs should have. Note that LOIs come in different lengths so this list is not necessary the only list since each deal will uniquely affect what topic the LOI will address:


  1. Name of the parties-- believe it or not, you need to properly identify the buyer and seller parties. This will give you a heads up (if the seller is paying attention) about who should be named as a seller party. Do we have 1 seller doctor or a few seller doctors involved? If we have a professional corporation with 3 shareholders, ideally, this would be the time to learn this. Why? Because it will help you anticipate whether all sellers are on the same page and if the transaction is legal, in nature. Remember that in most states, the sellers of a dental office, for example, must all be dentists (except for organized management structures, which are different). The name of the seller should include all of the owners and the practice entity name. The name of the buyer should be included and if the buyer will likely form an entity to serve as the purchaser, that can be included as (“and entity to be formed”).

  2. Identify the type of sale and what is included: will this be an asset/goodwill purchase or stock purchase? A general list of all items to be included would be helpful as well as a list of all items not to be included. Traditionally, a practice sale does not include any of the seller’s personal items like personal (non-business) laptop, library, diplomas, etc.

  3. Identify that liabilities and liens will/will not be conveyed with the sale. This will be different depending on what type of sale you are structuring. Most of the time, liabilities will not convey if you are conducting an asset/goodwill purchase.

  4. Identify the purchase price and how it will be paid. For example: are you paying in cash? Structured payments through a promissory note? Through lending proceeds at Closing?

  5. Anticipated closing date. While the date can change, it is important to have a realistic timeline for everyone to try to follow.

  6. Outline if the Seller will be bound to a restrictive covenant.

  7. Language about the lease, especially if the seller will be the landlord. Are you requiring a right to purchase the real estate or locking in a certain rental rate as a direct condition of moving forward? If you are buying the real estate, consider a separate LOI for the real estate to keep all parties organized.

  8. How will the due diligence process be conducted (time frame, meetings, etc.)? This section is generally broad to outline basic understandings to allow the buyer to conduct its due diligence after hours, for example.

  9. Are there any contingencies of the purchase price or the closing? (i.e., your due diligence, financing, if you are waiting for licensure, etc.)

  10. Are there any deposits being required from you? Will you be required exclusivity (especially if you put down a deposit)? If so, you may want to outline a provision that makes this provision legally binding if you are requiring a certain procedure to refund.

  11. Is there a required transition plan that you need the seller to accept (i.e., post closing employment?)

  12. Do you have any special instructions to the seller about operating the practice through closing (i.e., not to refund patient deposits and to transfer them to you at closing, not to provide pay raises unless required, not to terminate staff, etc.?)

  13. Is this LOI binding (meaning, is it a legal contract) or non-binding? This is very important.

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