Educational content only. This post explains how financial concepts and published data apply generally to healthcare practices — it does not constitute advice for your specific situation. Consult your accountant, lender, and relevant advisors before making any significant business or financial decisions.
The letter of intent — usually called an LOI — is the document that converts a practice sale from exploratory conversation to a structured transaction. Understanding what it contains, which terms are typically negotiated at the LOI stage, and which are left to the definitive agreement is useful before that document is in front of you.
What an LOI Is and Isn't
Published M&A and legal resources describe an LOI as a document that establishes the principal terms of a proposed transaction and creates a framework for due diligence and definitive agreement drafting. In most healthcare practice transactions, the LOI is non-binding with respect to the actual purchase obligation — meaning either party can withdraw before a definitive agreement is signed — but binding with respect to certain procedural obligations: exclusivity, confidentiality, and sometimes expense allocation.
Published resources consistently describe the LOI as the most important document to negotiate carefully in a practice sale — not because it's legally binding on the transaction, but because it sets the framework from which the definitive agreement is drafted. Terms that are poorly defined at the LOI stage tend to become points of contention during due diligence and definitive agreement negotiation.
Standard LOI Components
Published M&A practice resources describe the standard components of a healthcare practice LOI:
Purchase price and structure. The total consideration and how it's composed — cash at closing, vendor financing, earnout components, and equity rollover if applicable. Published resources note that the earnout terms deserve particular attention at the LOI stage because the earnout mechanics (what revenue period, what base, what calculation methodology) are difficult to revisit after they've been conceptually agreed.
What is being purchased. Asset purchase or share purchase, and in an asset purchase, which specific assets are included and excluded. Published resources note that the asset schedule — listing what's specifically included — is an LOI-stage negotiation that affects due diligence scope, tax structure, and definitive agreement drafting.
Conditions to closing. The conditions that must be satisfied before the transaction closes — financing conditions, regulatory approvals, landlord consent for lease assignment, staff retention conditions, and the completion of satisfactory due diligence. Published resources describe conditions to closing as one of the primary risk allocation mechanisms in an LOI — which party bears what risk if a condition fails to be satisfied.
Exclusivity period. A defined period during which the seller agrees not to solicit or negotiate with other potential buyers, giving the proposed buyer time to complete due diligence and draft the definitive agreement. Published resources describe exclusivity periods as typically ranging from 30–90 days in healthcare practice transactions. The binding nature of the exclusivity provision means that once signed, the seller cannot entertain competing offers during this period — which affects negotiating leverage if the buyer's offer subsequently shifts during due diligence.
Confidentiality. Published resources describe reciprocal confidentiality obligations as standard LOI components — both parties agree to keep the proposed transaction and the information shared during due diligence confidential. Published resources note that confidentiality is particularly important in healthcare practice transactions where staff, patients, and referral sources may react adversely to a premature disclosure.
Transition obligations. Published resources describe some LOIs as including high-level transition obligations — the seller's agreement to remain in the practice for a defined period post-closing to support patient transition, referral source introduction, and staff management. The specific terms are usually developed in the definitive agreement, but the framework is established at the LOI stage.
What's Not in the LOI
Published resources describe several significant transaction terms as not typically addressed at the LOI stage — representations and warranties, indemnification obligations, and detailed employment agreements. These terms are negotiated in the definitive agreement after due diligence is substantially complete. Published resources describe this as intentional — the LOI establishes the economic terms and process, while the definitive agreement addresses the risk allocation in detail once the parties have a clearer picture of what they're actually buying.
→ See also: How Practice Transitions Work in Canada and the US
Understanding the implied value range for your practice before any LOI conversation is useful context to bring to your advisors and broker. Educational reference — not a formal valuation.
Explore Your Implied Range →Disclaimer: All figures referenced are from published industry sources and represent general patterns — not estimates for any specific practice. KlinDeck is not a financial advisor, accountant, lender, or lawyer. Tools are educational references only. Consult qualified professionals before making significant decisions.