Buying and Selling Health Care Practices: Part Three

August 9, 2017

This is the third article of a multi-part series on the process of health care transitions prepared by Samuel N. Klewans and Michael Skerritt.

Begin the Dental Transition Process with a Letter of Intent

Dental transactions usually begin with a Letter of Intent. The Letter of Intent allows the purchaser and seller to negotiate the terms of a transaction before spending a significant amount of time (and money) to draft a final, legally binding agreement.

We always recommend that the purchaser (either a third-party purchaser or an associate in the practice) give the seller a Letter of Intent. This is a legally non-binding, two to four page document in which the purchaser tells the seller “I want to buy your practice for this amount of money, with these specific terms, these specific dates and these specific contingencies.” In the event that the purchaser and seller disagree on any of the terms of the Letter of Intent, they can negotiate until they reach agreement and then sign a final Letter of Intent.

The Purchase Agreement

Sometimes a purchaser presents the seller with a definitive purchase agreement from the start. We strongly disagree with this method because most professional health care providers are not trained to read legal documents, especially one as long as a purchase agreement. Not only is it difficult to understand, but when presented as a purchase agreement, the terms tend to become cast in concrete. By using a Letter of Intent, an agreement has been reached on all of the salient terms of the proposed transaction. Now the attorney who writes the definitive purchase agreement knows what to include. When the purchaser and the seller receive a definitive draft of the purchase agreement they can then make certain it comports with the Letter of Intent. Sometimes the Letter of Intent is prepared by the practice broker and sometimes by the purchaser’s attorney. Regardless of who prepares it, it is an extremely useful document leading to the commencement of the transition process.

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