A letter of intent is not an offer. It is an option on your practice, and in most drafts the buyer gets that option for free. The headline number is non-binding. The exclusivity that takes you off the market is binding. That asymmetry is the whole document, and every red flag below is a version of it.
For over four years I ran deal execution on the buy side at one of the country’s largest DSOs, across more than 50 transactions and over $500 million in deal value. My work started the day after a seller signed an LOI: running the diligence and execution those documents set in motion, living inside what they committed us to and what they left open, and watching what every open term turned into by closing. So this post reads the document from the buyer’s side of the table. If you are earlier in the process and want the full picture of how a sale works end to end, start with our complete guide to selling your dental practice and come back to this before anything lands on your desk.
First, What an LOI Actually Does
An LOI sets the headline terms of the deal: price, structure, what happens to you and your team after close. Almost all of that is labeled non-binding, which sellers read as “safe to sign.” What binds is usually just two things: confidentiality and exclusivity. The moment you sign, you stop talking to other buyers, and the buyer starts a diligence process designed to test every number the price was built on.
One term of art worth separating: in a brokered process, buyers often submit an indication of interest first. An IOI floats a value range, binds nobody, and grants no exclusivity; its job is to help the seller decide who advances. The LOI is the later, heavier document, the one with a signature line and an exclusivity clause. If signing it takes you off the market, it is an LOI, whatever the header says.
That is not sinister. It is how every professional acquirer works, and a well-drafted LOI protects both sides. But it means the LOI is your point of maximum leverage. Before signing, the buyer is competing for you. After signing, you are waiting on them. Terms you do not win in the LOI rarely improve later, because the leverage that would have won them is gone. Keep that frame and the red flags below are easy to understand: each one is a way the document quietly shifts risk onto you while you still had the power to refuse it.
Red Flag 1: Exclusivity That Runs Long or Renews Itself
Exclusivity is the buyer’s most valuable term, so look at it hardest. Sixty to ninety days is a normal ask. What you are watching for is length beyond that, automatic extensions (“extended for successive 30-day periods while the parties negotiate in good faith”), or no defined end at all.
Here is what that term looks like from the buy side: every week of exclusivity lowers the seller’s alternatives. Your other interested buyers move on to other deals. Your practice keeps aging on the same trailing numbers. A buyer who controls an open-ended exclusivity window has no calendar pressure and every incentive to let diligence sprawl. The month-by-month timeline of a sale shows most groups closing within about 90 days of LOI; an exclusivity clause much longer than that is not a scheduling convenience. Push for a defined period, extensions only by mutual written agreement, and ideally milestones the buyer must hit to keep it.
Red Flag 2: A Price Built on an EBITDA Nobody Defined
Most LOIs price the practice off a multiple of EBITDA, whether the page shows the multiple itself or only the dollar figure it produced. Very few define which EBITDA. Trailing twelve months as of when? Whose add-backs, yours or the ones their diligence team rebuilds? Measured at signing or re-measured at close?
This is the single most expensive ambiguity in the document, because it converts the headline price into a formula whose inputs the buyer’s team calculates later. When the quality of earnings review trims your adjustments, and I spent years deciding which add-backs earned credit and which did not, the multiple stays the same while the number it multiplies shrinks. The seller experiences this as a re-trade. The buyer experiences it as arithmetic, because the LOI never promised a dollar figure, only a formula. Before you sign, get the EBITDA basis stated: the measurement period, the agreed add-back list attached as an exhibit, and what happens if diligence lands within a normal tolerance of that number.
Red Flag 3: Silence on What You Are Actually Selling
Nearly every dental practice deal is an asset purchase. The buyer is not buying your corporation; they are buying the practice’s assets out of it: the patient records, the equipment, the goodwill, usually the name and the phone number. That is why terms you see in business-press coverage of big mergers, working capital pegs chief among them, mostly do not belong in your deal at all. In a dental asset purchase, the money questions live somewhere simpler, and a thin LOI often skips them entirely.
The clean LOI answers three questions in a sentence each. What is included in the purchased assets? What is excluded, which is typically cash and often the receivables you earned before close? And who collects those receivables after close, at whose cost, for how long? Behind those sit the practical ones: how supplies on hand are treated, what happens to equipment leases, and how the real estate is handled, whether that is a lease assignment, a new lease with you as the landlord, or a purchase alongside the practice.
None of this is exotic, and every line of it is real dollars. From the buy side, the pattern was consistent: ambiguity that survives into exclusivity gets resolved on the buyer’s paper, and the buyer’s paper was not written in your favor. Get the asset list, the exclusions, and the receivables treatment stated while the answers are still negotiable.
Red Flag 4: A Headline Number Doing Headline Work
Every DSO offer is a mix: cash at close, holdbacks, earnouts, equity. The LOI red flag is a document that advertises the total while staying vague on the mix, or one where the mix leans hard on the contingent pieces. A price that is half earnout is not the price on the cover page. It is a smaller guaranteed number plus a bet on future performance under a new owner’s management, measured by definitions that usually do not appear in the LOI at all.
The equity piece deserves its own sentence, because “equity” is not one thing. It generally comes in one of two shapes: holding company equity, shares at the parent level whose value rides on the entire platform and its debt, or joint venture equity, a retained stake at the practice level whose value rides on the practice you just sold. The two behave nothing alike in a downturn, in a recapitalization, or when you want liquidity. An LOI that says “equity” without naming which one, at what level, with what basic rights is deferring the most complicated part of your consideration to documents that get drafted after your leverage is gone.
Watch especially for the phrase “on terms to be set forth in the definitive agreements.” Earnout targets, equity class and rights, vesting, what happens to your stake if the platform recapitalizes: if the LOI defers all of it, you are agreeing to a structure whose terms get written later. Ask for the material mechanics in the LOI itself, even in summary form. A buyer who resists summarizing them is telling you something about what the long form will say.
Red Flag 5: Autonomy Promised in Adjectives
“Clinical autonomy will be preserved.” “The practice will continue to operate consistent with past practice.” These sentences read as commitments and bind nobody, because they name no mechanism. What schedule control do you keep? Who sets fees, hours, staffing, lab and supply choices? What does the practice’s post-close budget process look like, and who approves it?
Not every operational detail belongs in an LOI. But if autonomy matters enough to be your reason for choosing this buyer, it matters enough to name specifics. The groups that genuinely operate this way can describe their model concretely, and their answers stay consistent between the LOI, the management conversations, and the final documents. Vague language at this stage is not always bad faith. It is always a term you have not actually won yet.
Red Flag 6: The Expiring Offer
An LOI that arrives with a 48- or 72-hour signature deadline is applying pressure, and it is worth being clear about what the pressure is for. A serious buyer’s economics do not change in three days. What changes in three days is your ability to get a second opinion, run a competitive process, or have an advisor read the document. The deadline is priced against exactly that.
From the buy side, urgency is a tool used most on unrepresented sellers, and it works because the offer is real. The number is genuine; the timeline is the artificial part. A buyer who wants your practice this week will want it in three weeks. If the deadline is firm and non-negotiable, treat that as information about how the next twelve months of partnership will feel.
Red Flag 7: "Customary Restrictive Covenants"
Non-compete and non-solicit terms usually show up in the LOI as a single sentence, and seller forums treat that sentence like a five-alarm fire. Keep it in proportion. In a typical deal the selling doctor works through a defined transition period and then steps away, and a covenant rarely troubles a doctor who is done practicing. If your plan after the transition is retirement, this term deserves one careful read, not a crusade.
It deserves far more than one read in two situations. First, if you intend to keep practicing anywhere afterward: an associateship, locum work, a location you are keeping, teaching that involves patient care. Second, if the drafted scope reaches beyond what you actually sold, into specialties or activities that were never part of the deal. In either of those cases the boundaries belong in the LOI in numbers, miles, years, and scope included, not as “customary restrictive covenants.” Customary means customary for the buyer’s counsel, and their template was not written with your next chapter in mind.
Why LOIs Are Written This Way
None of the above makes the buyer a villain. It makes them experienced. A DSO’s LOI is drafted by people who have signed hundreds of them, refined each time a term cost them money. Open EBITDA definitions, unstated asset lists, one-word equity terms: these survive in their templates because they preserve flexibility for the buyer at the exact stage the seller stops being able to negotiate. By the time an LOI reaches you, the buyer’s internal machinery has already evaluated your practice and knows precisely which terms it intends to hold and which it can concede. The document is not aggressive. It is simply written by the side that does this for a living, for a reader who is doing it once.
Which is the real answer to all seven flags. You do not fix an LOI by spotting clauses one at a time. You fix it by arriving with alternatives, because every term above negotiates differently when the buyer knows you have somewhere else to go, and by having someone at the table who has read the document from the other side.
Before any LOI is on your desk, the useful first step is knowing what your practice is actually worth, measured the way a buyer will measure it. That is what our practice valuation is for: a clear-eyed read on your numbers, from the buyer’s perspective, before the first headline number tries to anchor you.