Negotiating the Sale of a Dental Practice

Jordan Uditsky • November 17, 2017

You’ve spent a lifetime building your practice and the time has come to put it on the market. You engage a qualified transition specialist who has located a buyer, and are ready to begin negotiating the deal. Most likely, the buyer or the buyer’s representative will submit to you a document setting forth the business terms of the proposed transaction. Called a “term sheet”, “letter of intent”, or “memorandum of understanding”, this document is generally a non-binding outline of the business terms of your sale. For purposes of our discussion, we’ll refer to this document as an “LOI”, the intent of which is to determine if the purchaser and seller can agree on the business terms of the deal before plunging head first into the transaction, which leads to the engagement of lawyers, accountants, bankers, and other advisors, all of which can be costly to both the purchaser and the seller. That being said, and although LOIs are generally non-binding, we always recommend that our clients have the LOI reviewed by counsel prior to execution as it does establish parameters for the deal that can be difficult to renegotiate at a later date.

So how is an LOI structured, what does it look like, and what terms should it address? An LOI can take many forms, but essentially it’s just a letter from the buyer to you, the seller, outlining the essential terms of the deal. What follows is a summary of the sections you should be sure are addressed in your LOI:

Purchase Price and Terms of Payment : For most sellers the most important term in any LOI is going to be the purchase price…how much is the purchaser going to pay you for the practice and how will that purchase price be paid? Will there be a deposit and if so, who will hold it and when does it become non-refundable? Is the full purchase price paid at Closing or will a portion be held back pending some sort of performance review post-Closing? Is the purchase price fixed or will it be adjusted based on pre-Closing metrics? Is the purchase price payable in all cash or is there some sort of seller financing? All the foregoing questions should be answered in this section of the LOI.

Assets to be Acquired : While a detailed list of assets will be included with the definitive purchase agreement for the practice, the LOI should include general categories of practice assets the buyer intends to purchase, including tangible assets like dental equipment, office furnishings, supplies, business equipment and leasehold improvements, as well as other intangible assets such as patient lists, phone numbers, websites and goodwill. Cash is almost always excluded, but should certainly not be overlooked. Any other excluded assets, including personal effects, should be indicated here though will be detailed in the definitive purchase agreement. This section will also include a plan for handling the accounts receivable of the practice. Will the buyer be purchasing them, and if so at what percentage? Will the seller retain them but with assistance in collection from the buyer (usually for a nominal administrative fee)? If a patient owes money to both the seller and the buyer, who gets paid first? Addressing accounts receivable is never as simple as stating that the seller retains all accounts receivable or the buyer will purchase the accounts receivable. Complicated issues about ownership, collection, and administration should be addressed before the parties proceed.

Allocation of Purchase Price : While this may not be definitively known at the LOI stage, you as the seller should be aware and should discuss with your accountant what the tax allocation of the purchase price should be. While even more important for dental practitioners still utilizing a corporate tax as opposed to a pass-through structure, the allocation of the purchase price between tangible assets such as equipment and intangible assets such as goodwill can have significant financial consequences if not planned efficiently.

Post-Sale Transition : Most buyers will be looking for you to continue on in the practice for a period of time to ensure the smooth transition of the patients to a new dentist. While specifics will be detailed in both the definitive purchase agreement and possibly a post-sale employment agreement, it would be wise to set forth in the LOI the agreed upon term of any such engagement, such as how long the buyer expects you to maintain your current schedule and when you can start throttling back your hours, as well as the compensation for your services. If you have associates and key staff, there may also be language addressing the seller’s obligation, if any, to ensure the associates and staff stay with the practice as they may be integral to the profitability and successful transition.

Restrictive Covenant : Almost every practice transition I’ve assisted with has included a restrictive covenant imposed on the seller prohibiting the seller from competing with the practice after the sale. A fairly straightforward and industry standard provision, most restrictive covenants address both the period of time the restrictions will be in place as well as a radius in which the selling dentist is prevented from practicing. Restrictive Covenants may also include non-solicitation provisions preventing the buyer from soliciting patients and staff from the practice after the sale.

Earn-outs : While perhaps a bit less common than a simple all-cash purchase, some transitions will be structured in such a way where the selling dentist is paid a portion of the purchase price up-front with post-closing payments based on performance of the practice. These payments may be made over a period of years following the closing, aligning the future success of the practice with the selling dentist’s performance. While an entire article could be dedicated to the merit and risk of deals structured with earn-out components, needless to say that they should be described in detail in the LOI to ensure the parties are on the same page before they move forward. Earn-outs can provide a seller with an opportunity to receive a higher overall purchase price for their practice, but they can also result in conflict with the buyer and should be fully vetted by the seller’s advisors before they are agreed to.

Exclusive Dealing : While LOIs are non-binding, certain provisions can by agreement be made to be binding in the LOI. Exclusive dealing is one of those provisions that a buyer may request to be binding on the parties and will effectively require the seller to remove the practice from the market while the parties are negotiating the deal. Practice transitions can be expensive. Even at the LOI stage the parties may engage consultants, accounting firms, attorneys, and other advisors to assist in the evaluation of the transaction. Buyers don’t want sellers continuing to market the practice only to find another deal while the buyer has invested substantial financial resources in evaluating and negotiating the transaction. To induce you to remove your practice from the market though, a buyer may be required to put up earnest money as a sign of good faith to show that the buyer is serious about the acquisition. The LOI should indicate the amount of the earnest money, whether it is refundable, who will hold it, and under what conditions.

Confidentiality : Another binding aspect of the LOI, both parties should agree to keep their negotiations and any information or documentation they receive during the negotiations and due diligence period prior to execution of a binding purchase and sale contract confidential.

Lease : While glossed over in many an LOI for the purchase and sale of dental practices, the parties should certainly come to a meeting of the minds to ensure everyone is on the same page regarding the physical plant. Buyers will often have specific requirements driven by their lender as to the terms of the lease for any practice they intend to buy. Questions that should be addressed include whether the lease will be assigned to the buyer, whether the deal is conditioned upon negotiation of an extension or renewal of the lease term, and whether a seller’s guaranty, if a guaranty was provided to the landlord, will be released at closing.

Other Conditions and Contingencies : Other terms and conditions that may be addressed in an LOI include, among others, timing of closing, due diligence, financing, access to information and staff, governing law, responsibility for expenses, and broker’s fees. As LOIs reflect the terms of a particular transaction, each will be a bit different and there is no standard form. The key is to ensure that each LOI sufficiently describes the terms of the business deal between the parties such that they can proceed toward a definitive purchase agreement and eventually a closing. If you need assistance preparing a letter of intent for your practice, or have questions about purchasing or selling a dental practice, the attorneys at Grogan Hesse & Uditsky, P.C. are here to help. Visit us at www.chicagodentalattorney.com for more information.


Jordan Uditsky is an attorney and business advisor serving businesses in the Chicagoland area and throughout the country. Mr. Uditsky advises businesses and entrepreneurs from startup to sale, and strives to be a trusted advisor to his clients by delivering practical and efficient counsel on a wide range of matters. His combination of legal and business experience provides a unique perspective when counseling clients, giving him an understanding of the true value and application of his advice to their organizations. To learn more about Mr. Uditsky, visit www.ghulaw.com.


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By Jordan Uditsky • August 6, 2025
Dental practices that choose to lease rather than purchase and own their business location have several options for setting up shop. While plenty of practices operate out of stand-alone buildings, even more lease space in retail shopping centers, professional buildings, or office complexes. The terms of that lease – from the rent to the term to build-out, termination, or assignment rights – can have an outsized impact on the growth and success of a practice. But one lease provision, in particular, can determine whether your practice faces stiff and unwanted competition from another practice just steps from your office’s front door: the exclusivity (or exclusive use) clause. What Is An Exclusive Use Provision in a Dental Practice Lease? As the name implies, an exclusive use clause in a lease limits the landlord’s ability to lease space in the same complex or building to another tenant engaged in the same type of business. Think about why you would choose a particular location for your practice. Aside from the features of the space itself, it is likely because of favorable characteristics like foot traffic, accessibility, parking, and the lack of other similar practices in the surrounding area. If, after conducting demographic research and spending time and resources selecting the perfect location for your practice, your landlord could wipe out those efforts with the stroke of a pen by leasing space nearby to a competing practice, it could be a devastating blow. Negotiating an Exclusive Use Provision Most commercial leases are initially prepared by the landlord. As such, they are unsurprisingly skewed in favor of the landlord’s interests. It is unlikely that a landlord would voluntarily and preemptively tie their hands by limiting the pool of potential tenants. That is why the burden is usually on the tenant to push for and negotiate an exclusivity provision. When negotiating the terms of your dental practice lease (which you should only do with the help and counsel of an experienced attorney), the goal will be to get your landlord to agree not to rent space to other dental practice tenants. If your landlord refuses to limit their ability to lease space to other dentists generally and you nevertheless want to pursue the desired space, you may be able to be more specific and agree to a provision that restricts the landlord’s ability to lease to a particular competing specialty such as pediatric dentists, orthodontists, periodontists, etc. Protecting Yourself From a Landlord’s Breach of an Exclusivity Clause The contracts most likely to be broken are those with few, if any, consequences for violating their terms. That is why the value of an exclusivity provision is directly related to the price that the landlord will pay for entering into a lease with a competitor despite the clause in your lease. Given the potentially catastrophic impact of having a neighbor in the same building siphoning off your patients and diluting your hard-earned goodwill, that price should be significant. Several different penalties can serve to protect your practice from a breach of an exclusivity provision: Rent Abatement. One of the most straightforward and commonly used remedies is rent abatement. If the landlord allows a competing business to open in violation of the exclusive use clause, an abatement penalty can entitle you to a full or partial reduction in base rent or other charges. This abatement typically remains in effect until the violation is cured or the competing tenant leaves. The lease should specify the amount of rent to be abated (e.g., 50% of base rent) and whether the abatement applies to other charges such as common area maintenance fees or percentage rent. Termination Right. A strong lease will give the tenant the option to terminate the lease entirely if the landlord fails to cure the violation within a specified period after notice. This is a significant penalty that underscores the seriousness of the exclusive use protection. Liquidated Damages. Liquidated damages provide a pre-agreed amount that the landlord must pay if it breaches the exclusive use clause. This can be calculated based on the tenant’s projected loss in revenue, estimated lost profits, or some other measurable metric tied to the tenant’s business performance. Injunctive Relief. Ideally, the lease should give you the right to seek injunctive relief from a court to stop the violation of the exclusive use provision, such as requiring the landlord to terminate the lease or evict the competing tenant.  Getting a landlord to agree to a strong exclusivity provision with equally strong penalties for breaches of it requires deft and persuasive negotiating skills, and is yet another reason why dental practice owners should never enter into or negotiate a lease without the assistance of experienced counsel. If you are considering a lease for your practice, please contact Grogan Hesse & Uditsky today at (630) 833-5533 or contact us online to arrange for your free initial consultation. We focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you. 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Amendments to Illinois Dental Practice Act Provide More Flexibility When Hiring New Dental School and Dental Hygienist Graduates

By Jordan Uditsky • July 9, 2025
Recent amendments to the Illinois Dental Practice Act (the “Act”), which Gov. JB Pritzker is expected to soon sign into law, will make it easier for newly minted dental professionals to begin practicing while their license applications are pending. The amendments, which would take effect on January 1, 2026, establish the following criteria under which license-pending dentists and dental hygienists can practice under the delegation of a licensed general dentist: The Applicant has completed and passed the IDFPR-approved licensure exam and presented their employer with an official written notification indicating such; The Applicant has completed and submitted the application for licensure; and The Applicant has submitted the required licensure fee. Once obtained, authorization for dentists and dental hygienists to practice under these provisions can be terminated upon the occurrence of any of the following: The Applicant receives their full-practice license; IDFPR provides notification that the Applicant’s application has been denied; IDFPR requests that the Applicant stop practicing as a license-pending dentist/dental hygienist until the Department makes an official decision to grant or deny a license to practice; or Six months have passed since the official date of the Applicant’s passage of the licensure exam (i.e., the date on the formal written notification of such from the Department). IDFPR has yet to post anything on its website regarding these amendments, but we will provide an update if and when it does. If you have any questions about these new provisions regarding the employment of license-pending dentists and hygienists, please contact Grogan Hesse & Uditsky today at (630) 833-5533 or contact us online to arrange for your free initial consultation. We focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you. Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.
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