Much More Than a Handshake: What Dental Practice Owners Need to Know About Letters of Intent When Selling to a Dental Service Organization

Jordan Uditsky • May 6, 2026

What Dental Practice Owners Need to Know About Letters of Intent When Selling to a Dental Service Organization

The road to hell is paved with good intentions, as they say. So too is the expressway that leads to failed business transactions, including the sale of a dental practice to a Dental Service Organization (DSO). One stop along that journey from concept to contract is called a letter of intent (LOI), in which a DSO and a practice owner may agree in principle to the broad outlines, or even specific details, of a practice acquisition. But if negotiations then go south, and one party wants out of the putative deal, can the other party enforce such a document?

 

Also sometimes called a memorandum of understanding or term sheet, a letter of intent is a strange legal animal. These documents are curious hybrids in the law in that they represent more than a handshake or an empty promise but are less than a fully realized, definitive contract that sets forth all of the many terms that define the parties’ rights and obligations.

 

Even though an LOI isn’t exactly a formal contract, a court may treat a letter of intent as an enforceable agreement if the parties intended to be bound by it and it contains the material terms of the proposed transaction. Other times, a letter of intent may be treated as simply an “agreement to agree” at some point in the future rather than a legally binding and enforceable contract.

 

If you are in the early stages of a potential sale of your dental practice to a DSO, here is what you need to know before negotiating the terms of and signing a letter of intent.


Are you interested in speaking with one of our attorneys? Click here to contact us now.

 

What Is a Letter of Intent, and Why Does It Matter in a Practice Sale?

 

A letter of intent is a document that outlines the basic terms of a proposed transaction before the parties invest the time and expense of drafting a definitive purchase agreement. In theory, LOIs are non-binding. In practice, they are far more powerful than that characterization suggests.

 

Here is why: once you sign an LOI, several things happen simultaneously. First, you will almost certainly be asked or required to agree to an exclusivity period, typically 60 to 120 days, during which you cannot solicit or entertain offers from other buyers. Second, the LOI sets the psychological and practical framework for the far more detailed negotiations that follow. Lawyers drafting the definitive agreement use the LOI as their roadmap. Terms that were not addressed in the LOI tend to be resolved in the DSO's favor because DSOs do this every day, and their counsel knows exactly where the ambiguities lie. Third, while the core economic terms are nominally non-binding, courts have, as noted, occasionally found partial enforceability where one party relied on LOI terms to its detriment.

 

Accordingly, you shouldn’t treat an LOI as merely an aspirational document or something you (or the DSO) can easily disregard if negotiations go sideways. Sign the letter as if you are signing a binding contract (including NOT signing it without the advice of counsel), because in many respects it is. 

 

Key DSO LOI Terms Every Practice Owner Should Scrutinize

 

A letter of intent in a practice sale to a DSO may not be as voluminous and verbose as the final agreement will inevitably be, but that doesn’t mean it will lack detail. There are many terms in an LOI that practice owners must scrutinize and understand because they may ultimately be bound by them.

 

Purchase Price and Structure

 

The headline number in a dental practice sale to a DSO is rarely the whole story. DSO transactions are frequently structured with a combination of cash at closing, rollover equity in the DSO or its parent entity, and earnouts tied to future production benchmarks. Each component carries different risks. Rollover equity, in particular, deserves careful attention because you are being asked to exchange your liquid practice value for an illiquid minority interest in a private entity. What are the liquidation preferences? What are the redemption rights? What happens if the DSO is recapitalized or sold? If the LOI does not address these questions, you are negotiating in a fog.

 

EBITDA Adjustments and Working Capital Targets

 

Many practice owners are surprised to learn that the valuation multiple applied to their practice is not applied to their reported revenue but instead to a normalized EBITDA figure, which the DSO will aggressively adjust downward over the due diligence period. Push for specificity in the LOI regarding how EBITDA will be calculated and what adjustments the DSO intends to make.

 

Post-Closing Employment and Restrictive Covenants

 

Nearly every DSO transaction requires the selling dentist to sign an employment agreement and remain with the practice for a specified period, typically 3 to 5 years. The LOI should address your compensation structure, clinical autonomy, and the scope of any non-compete and non-solicitation provisions. Non-competes in dental DSO transactions are routinely overreaching in geographic scope and duration. While such overly broad covenants may ultimately be of questionable validity and enforceability, you shouldn’t presume as such and instead use your leverage at this stage to negotiate the least restrictive limitations possible on your post-closing activities.  

 

Representations, Warranties, and Indemnification

 

While the definitive agreement will contain detailed representations and warranties, the LOI should signal what the DSO expects regarding survival periods and indemnification caps. A seller-friendly posture would include a cap tied to a percentage of the purchase price and a reasonable survival period. An uncapped or extended indemnification obligation can dramatically alter the economics of your deal.

 

You Have Leverage When Negotiating the Terms of an LOI. Your Counsel Can Help You Use It.

 

Many practice owners, dealing with the faceless behemoth of a DSO and itching to get a deal done, consistently underestimate their leverage during the LOI stage. Experienced counsel will know better and be able to leverage the following pressure points when helping you negotiate the LOI’s terms:

 

·        Stiff Competition. The DSO market is crowded and active, and well-run practices in desirable markets can attract multiple suitors, whether DSOs or otherwise. Even if you have a preferred potential buyer, letting that DSO know you are in active conversations with others, or simply that you have options, changes the negotiating dynamic entirely.

·        Operational metrics. Strong collections, a loyal patient base, skilled hygienists, and a modern facility are real, quantifiable assets. Before negotiations begin, have your financials professionally prepared and be ready to present a clear picture of your practice's value drivers. DSOs value predictability; if you can demonstrate it, you command a premium.

·        Patience is a Virtue. A “highly motivated” seller who signals their eagerness to get a deal done ASAP might as well be wearing a sign that says “Kick Me,” because the DSO will seize on that impatience to make a lowball offer or unreasonable demands. If you are not under financial or personal pressure, signal that you are selective and patient rather than eager.

 

DSOs negotiate dozens of practice acquisitions, including letters of intent, each year. You do not. That is why retaining an attorney experienced in dental DSO transactions before you receive the LOI is not just good practice; it is essential for maximizing the upsides of a deal that will define your professional and financial future.

 

If you are a dental practice owner considering a sale to a DSO or have been presented with an LOI, please call ddslawyers.com at (630) 833-5533 or contact us online to arrange for your complimentary 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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Specifically, the state can charge interest at 1% per month on the value of the unreported/unpaid property and impose a penalty of $200 per day up to a maximum of $5,000 until the date a report is filed or the unclaimed property is paid or delivered. For businesses that may have neglected their obligations under the Act, Illinois (and most other states that have adopted the uniform act) offers a Voluntary Disclosure Agreement (VDA) program for unclaimed property holders. In exchange for voluntary compliance through an executed VDA, the Treasurer's Office will agree to forgo the right to assess penalties and interest outlined in the Act. How To Address Unclaimed Property Obligations in a Practice Sale As part of transactional due diligence, a practice purchaser should ensure that the seller has satisfied all of its reporting obligations under applicable law. 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