What Should You Know Before Partnering with a DSO?
A corporate offer usually arrives unsolicited, carries a bigger number than you expected, and asks for an answer sooner than feels comfortable. Before you respond, understand what is actually being purchased: not just your practice, but several more years of your clinical production, a share of your future upside, and control over how the business is run.
A DSO partnership can be an excellent outcome for the right dentist, and a long, expensive disappointment for the wrong one. Dental Strategic advises owners across the United States on exactly that question, and we have no financial interest in which way you decide.
This Article Will Address
- What a support organization is and what it takes over
- How much say you keep over clinical decisions
- The way these deals are structured, including equity that rolls forward
- Employment terms and payments tied to future performance
- What happens to your staff, your name, and your systems
- The risks worth weighing and how to test whether the fit is right
The LOI sets direction, not completion
A signed letter of intent usually confirms the major business terms the parties intend to pursue: price, structure, timing, exclusivity and the broad outline of the transition. It gives the buyer and seller a common direction. It does not replace the definitive purchase agreement, lender approval, diligence, third-party consents or the detailed schedules required to close.
Some LOI provisions may be binding and others may be nonbinding, depending on the document and applicable law. The seller should have transaction counsel review the LOI and every definitive agreement. The practical point is simple: once the LOI is signed, the transaction needs a disciplined closing process.
Build one closing plan with clear ownership
The easiest way to lose momentum is to manage the transaction through scattered emails. Create one open-item list with the responsible person, due date, current status and next action. The seller, buyer, lender, attorneys, CPA, broker, landlord and other advisers should know which items they own.
A good closing plan separates work into financing, diligence, legal documents, third-party approvals, employee and patient matters, tax and allocation, debt payoffs, and operational cutover. Review the list at least weekly. As closing approaches, move to shorter check-ins so a missed signature or stale payoff statement does not create a last-minute delay.
Lender underwriting continues after the LOI
A buyer may have a strong prequalification and still need to complete formal underwriting. The lender will test repayment ability, verify the transaction structure and confirm that required documents and conditions are satisfied. Requests may include current financial statements, tax returns, production reports, a detailed asset list, buyer information, lease terms, entity documents and a business valuation.
For SBA-supported financing, the controlling SOP in effect when the loan is processed matters. SBA SOP 50 10 8.1 is effective October 1, 2026 and governs 7(a) and 504 origination requirements from that date. The lender remains responsible for credit analysis and closing requirements. Sellers should respond quickly, but they should also keep the data consistent. A P&L that does not reconcile to tax returns or practice-management reports creates additional questions and can slow approval.
Diligence must connect the financial and operational story
Diligence is more than sending three years of tax returns. The buyer needs enough information to confirm the practice described during negotiations. That review can include collections, provider production, patient activity, payer mix, fee schedules, staffing, compensation, benefits, equipment, software, leases, contracts, accounts receivable, prepaid treatment, patient credits and unresolved legal or compliance matters.
The strongest response is organized and explainable. If an expense was discretionary, show the documentation. If a provider left, explain the effect on production. If equipment is leased, provide the agreement and payoff or assumption requirements. A broker should help the seller answer the business question behind each request instead of forwarding documents without context.
The asset purchase agreement carries the transaction
The definitive agreement converts the negotiated business deal into enforceable obligations. It usually addresses the assets being transferred, excluded assets and liabilities, purchase-price allocation, representations and warranties, closing conditions, indemnification, restrictive covenants, transition obligations and the handling of items such as accounts receivable and patient credits.
The schedules attached to the agreement deserve the same attention as the main document. They identify equipment, contracts, employees, exceptions to representations, liens, assumed obligations and other deal-specific facts. Incomplete schedules can create disagreement at closing or after ownership changes. The attorney drafts the legal terms, while the seller, buyer and broker must confirm that the schedules match the actual practice.
Purchase-price allocation should be addressed before the final draft
In an asset sale, the total price is allocated among the transferred assets. That allocation can affect the seller’s tax character and the buyer’s basis and future deductions. The IRS generally treats a lump-sum business sale as the sale of separate assets and requires the residual method when the rules apply. Buyer and seller generally report an applicable asset acquisition on Form 8594.
Allocation should not appear for the first time on the final closing statement. The parties should involve their CPAs before the purchase agreement is final. Equipment, supplies, identifiable intangibles, restrictive covenants and goodwill can receive different treatment. A negotiated number that looks harmless in the agreement may have a material tax effect for one side.
Payoffs, consents and closing conditions must be current
The seller may need lender payoff letters, lien releases, landlord consent, equipment-lease assignments, software transfers, entity approvals and confirmation of professional or facility requirements. Each item has its own lead time. A payoff statement can expire. A landlord may require a buyer application. A vendor may restrict assignment. These are not closing-day tasks.
The closing team should also confirm insurance, banking, payroll, merchant processing, practice-management access, phone numbers, websites, email domains and patient communication. The legal closing transfers ownership. The operational cutover determines whether the practice functions normally the next morning.
Finish with a reconciled closing statement
Before funds move, the seller should understand the complete closing statement. Start with the purchase price, then trace debt payoffs, transaction expenses, prorations, patient credits, holdbacks, escrows and any seller financing. Confirm where accounts receivable, work in progress, supplies and laboratory obligations are addressed.
The closing statement should agree with the purchase agreement and the tax model. Any late adjustment needs an explanation and approval. A seller who reviews the net proceeds only after documents are ready for signature has waited too long.
The broker keeps the business deal connected
The attorney protects the legal position. The CPA advises on tax and accounting. The lender controls underwriting and funding. The broker keeps the business terms, valuation, diligence, schedules and closing timeline connected across those specialists.
That coordination matters even when the seller already knows the buyer. Finding a buyer solves one question. Completing a well-supported transaction requires a process for the other hundred questions that appear between the LOI and closing.
Next step
The LOI creates the path. The closing plan manages the path. If you are under LOI or already have a buyer, Dental Strategic can help coordinate valuation, diligence, transaction support and the business details required to reach closing.
Request transaction support and the post-LOI seller checklist.
Sources
Educational information only. This article does not provide legal, tax or accounting advice. Obtain advice specific to your transaction.