What Happens After I Sign a DSO LOI?
After signing a letter of intent, the buyer typically begins confirmatory financial, operational, clinical and legal due diligence while both sides negotiate the definitive purchase and employment documents.
The LOI is the beginning of the final transaction process, not the closing.
Stage 1: Due diligence
The buyer may request tax returns, P&Ls, production reports, payroll, provider reports, payer contracts, the lease, equipment information, an employee census, benefit information, corporate documents and malpractice information. The buyer is testing whether the assumptions behind its offer are accurate.
Stage 2: EBITDA confirmation
One of the most important questions is whether the normalized EBITDA in the LOI survives diligence. If earnings were overstated or add-backs cannot be supported, valuation may be renegotiated.
Stage 3: Legal documentation
Attorneys typically negotiate the purchase agreement, employment agreement, restrictive covenants, lease assignment or new lease, rollover equity documents, transition services and ancillary agreements.
Stage 4: Operational planning
The parties may coordinate payroll transition, employee communications, insurance, credentialing, banking, revenue cycle, IT, procurement, benefits and marketing.
Stage 5: Closing conditions
Before funding, the buyer confirms required conditions have been satisfied. Then transaction documents are executed and consideration is funded according to the agreement.
Why transactions fail after LOI
Common reasons include EBITDA that does not hold up, disagreement over employment terms, lease problems, credentialing issues, undisclosed liabilities, financing changes, cultural concerns and unrealistic legal positions.
The goal
The goal is not merely to get an LOI. The goal is to enter LOI with a buyer and structure capable of actually reaching closing.
Understand the complete offer before signing an LOI.
See how DexCompare worksMarket ranges on this page are illustrative planning ranges, not offers. Involve qualified legal and tax advisers on any transaction.