A dental practice acquisition deal must sign a memorandum of understanding. The letter of intent, or “LOI,” or deposit agreement, lays out the essential points of a transaction. It also lays out a timetable for the parties to follow before finalizing the deal.
There are many ways to save time and money by drafting a well-written letter of intent (LOI) that addresses the key deal points and provides an easy foundation for establishing the transaction agreements, according to Irvine Dental Attorney.
A dental practice LOI, what should it include? The following are some things to keep in mind:
- Assertion Of Trust Funds Or Earnest Money
Most loans require a buyer to pay roughly 1% of the purchase cost in an account held to show good faith in their plans to proceed with the transaction. If the buyer terminates the contract before the expiration of the contingencies, the deposit and earnest money will be refunded. Some LOIs indicate that if the purchaser fails to meet the contingencies, the investment will be forfeited or “go hard.”
- The Cost Of A Good
The purchase price is, of course, the most important word in the transaction. How much that’s the buyer spending on the assets? Parties must agree on the purchase price’s details before finalizing it.
Is there a seller-carryback option in which the seller finances all or a portion of the purchase price? What are the terms & conditions of the seller’s loan to the buyer, if possible? A holdback amount may also be necessary to address seller obligations arising after the closing and a seller’s carry-back. Another consideration is whether a portion of the purchase cost is based on the practice’s future success.
The participants will need to determine which asset classes are now being purchased and which assets are now excluded from the transaction. The buyer often receives all of the dental practice’s patient information, tangible and intangible assets, phone numbers, as well as websites, perform the contract, and a lease assignment. Accounts receivable, cash on hand at closing, refunds owed, and the seller’s items are all examples of excluded assets.
- Prohibitive Restrictions
A Medical Office Letter of Intention – Health Law What to Include The acquisition of a business is an exception to the rule that non-compete agreements are unenforceable. After closing a deal, buyers in California can prohibit the seller from competing in a particular geographic area. As a result, the parties wish to be clear about these limitations in the LOI. After the transaction, the seller should be unable to open or work for another dental office in a particular period and area.
- On Or Before The Due Date
By setting an early closing date, all parties can strive toward a common goal. Most dental office sales are completed within 30 to 60 days of the parties signing the letter of intent. To keep the buyer’s attention, sellers prefer a short time frame. Due diligence and securing financing may need a longer pre-closing time frame for purchasers.
- Clause Of Exclusivity/No-Shopping
The buyer will spend time and money on due diligence and closing preparations throughout the contingency periods. To prevent the seller from selling or discussing the practice before the parties’ scheduled closing date, the buyer should include a “no-shop” clause in the LOI.
A dental practice’s letter of intent isn’t the same as another dental office. The best ones have a clear understanding of the primary deal conditions, the significant post-closing commitments, and a defined timeframe for the contingencies as well as closing. As a result of all of these aspects, both parties are better prepared for future success.