Guide

Negotiating a DSO LOI: what to fix before you sign exclusivity

Your leverage peaks the moment before you sign the LOI and drops by half the moment after. Here is what belongs in the LOI, not the APA negotiation.

By Blane Jackson, DDS/MBA · Practicing dentist and multi-practice owner/operator · Updated April 2026

Most sellers treat the LOI as a formality — a short, friendly document that gets the process started, with the real negotiation saved for the asset purchase agreement. The buyers are counting on exactly that. The LOI is where your leverage peaks, because it is the last moment the DSO is still competing for your practice.

Why the LOI is the high-water mark

Nearly every DSO LOI contains an exclusivity clause: a 30-to-90-day no-shop period during which you cannot talk to other buyers. The moment you sign it, the competitive dynamic is gone. The buyer's diligence team and counsel now control the calendar, and every term you failed to pin down becomes a concession you have to win back — one at a time, against the clock, with your alternative buyers gone cold.

The practical rule: anything that matters economically belongs in the LOI in specific terms, even if LOIs are technically non-binding. A buyer who resists writing a term into the LOI is telling you what the APA draft will look like.

What to lock before exclusivity

• The EBITDA definition. Not the multiple — the definition. Doctor-comp normalization method, add-back treatment, and working capital methodology. Two LOIs at "6.5x" can differ by 20 percent in actual proceeds based on this paragraph alone.
• Cash at close as a number. Holdback percentage, escrow period, and seller-note terms if any. "Majority cash" is not a term; "$1.9M wired at close, 10% escrow for 12 months" is.
• Your post-close compensation formula. Percentage of collections or production at a stated rate. If it is not in the LOI, the employment agreement draft will arrive at associate-market rates and you will negotiate it during exclusivity.
• Earnout metric and period. Revenue-based, 24 months or less, with an independent review mechanism. If the buyer insists on EBITDA-based, that fight is far easier to win while they are still bidding.
• Non-compete scope. Radius and duration, stated numerically. The difference between 5 miles / 12 months and 10 miles / 24 months is the difference between repositioning your career and ending it locally.
• Exclusivity length and an exit. Cap the no-shop at 60 days, with an automatic end if the buyer has not delivered an APA draft by a stated date. Open-ended exclusivity is a free option on your practice.

What you can leave for the APA

Representations and warranties detail, indemnification baskets and caps, disclosure schedules, lease assignment mechanics, and transition operating covenants are genuinely APA-stage work. Trying to negotiate all of it in the LOI stalls deals without adding leverage. The line is simple: economics and restrictive covenants in the LOI; legal mechanics in the APA.

The two-offer rule

Every term above is dramatically easier to win with a second written offer on the table — even a weaker one. If you have only one buyer, get a second conversation started before responding to the first LOI. The market for good practices is deep enough that this costs you two weeks, and it changes the answer you get on almost every request.

Walk-away discipline

Decide your floor — cash at close, comp formula, non-compete scope — before the first LOI arrives, and write it down. Sellers who define their floor in advance negotiate from positions; sellers who do not negotiate from fatigue. Ninety days into exclusivity, with diligence consuming your front desk and your family asking when it will be over, "close enough" starts to look acceptable. The buyer's process is designed around that moment.

If the LOI will not come together on terms that clear your floor, the cleanest no is before exclusivity, not after. There will be another buyer. There will not be another moment of peak leverage on this deal.