What Happens Between Signing an LOI and Closing a Medical Practice Sale?

1. The Letter of Intent Establishes the Framework

A Letter of Intent outlines the proposed purchase price, transaction structure, payment terms, anticipated closing date, and other important conditions. Most LOIs are largely nonbinding, although provisions involving confidentiality, exclusivity, and certain expenses may be enforceable.

Once signed, the buyer typically receives a defined period to investigate the practice before committing to the acquisition. During this time, the seller generally agrees not to negotiate with competing buyers if an exclusivity provision applies. Although signing an LOI represents meaningful progress, it does not guarantee the transaction will close.

2. Due Diligence Begins

Due diligence is one of the most important stages of a medical practice sale. During this process, the buyer verifies the financial, operational, legal, and regulatory information provided by the seller.

Buyers typically request tax returns, profit and loss statements, balance sheets, payroll records, equipment inventories, lease agreements, provider contracts, and information regarding outstanding liabilities. Medical practices also require additional examination of payer agreements, billing procedures, compliance policies, provider credentials, and applicable healthcare regulations.

The buyer's objective is to confirm that the practice performs as represented and identify any risks that could affect future operations. For sellers, organized records and prompt responses can significantly reduce delays and strengthen buyer confidence.

3. Financing and Purchase Structure Are Finalized

If the buyer requires financing, the lender will conduct its own review of the transaction. This may include examining historical earnings, cash flow, the buyer's financial qualifications, and the practice's ability to support acquisition debt.

Financing approval can depend on several factors, including the purchase price, down payment, collateral, and transaction structure. During this stage, the parties may also finalize whether the sale involves practice assets or ownership interests in the existing business entity.

These decisions have important legal, tax, and operational implications. Experienced transaction attorneys and accountants should evaluate the structure before definitive agreements are signed.

4. The Purchase Agreement Is Negotiated

After due diligence begins, attorneys typically prepare and negotiate the definitive purchase agreement. Unlike the LOI, this agreement establishes the binding terms governing the transaction. It addresses the purchase price, payment arrangements, included assets, assumed liabilities, representations and warranties, closing conditions, and responsibilities of each party.

The agreement may also cover restrictive covenants, seller transition assistance, employment arrangements, and procedures for resolving disputes. Negotiations during this stage are common. Clear communication between the buyer, seller, attorneys, and business broker helps prevent minor disagreements from becoming major obstacles.

5. Regulatory, Licensing, and Contractual Requirements Are Addressed

Medical practice acquisitions involve requirements that do not typically apply to ordinary business sales. Depending on the specialty, state, and transaction structure, the buyer may need professional licenses, facility approvals, payer enrollment updates, or other regulatory authorizations. Ownership restrictions, corporate practice of medicine rules, patient record requirements, and provider credentialing must also be evaluated.

Additionally, the parties must determine whether the office lease, vendor agreements, and other essential contracts can be assigned or require new agreements. Because certain approvals and payer enrollment processes can take considerable time, addressing these issues early is essential to avoiding closing delays.

6. Transition Planning Takes Shape

A successful medical practice sale involves more than transferring financial assets. It also requires maintaining patient confidence and operational continuity. During the transition planning stage, the parties determine how employees, patients, referral sources, and vendors will be informed about the ownership change.

Staff retention, patient record custody, billing responsibilities, scheduling systems, and physician transition arrangements should be carefully coordinated. The timing and content of announcements must also account for confidentiality obligations and applicable legal requirements.

A well-planned transition protects the practice's reputation while helping the buyer preserve the value of the business being acquired.

7. Final Preparations and Closing

As the closing date approaches, the parties confirm that all contractual conditions have been satisfied. Final activities may include completing financing documentation, obtaining required consents, verifying equipment and assets, calculating purchase price adjustments, and arranging the transfer of funds.

At closing, the required agreements are executed, payment is made according to the purchase agreement, and ownership transfers under the agreed terms. Certain responsibilities, including transition assistance or post-closing adjustments, may continue afterward.

The Bottom Line

The period between signing an LOI and closing a medical practice sale can be complex, but proper preparation makes the process significantly more manageable.

Working with an experienced medical practice business broker, healthcare attorney, and accountant helps sellers navigate due diligence, coordinate negotiations, address potential obstacles, and maintain momentum throughout the transaction.

Ultimately, a successful closing depends on preparation, transparency, communication, and careful execution. Understanding what happens after the LOI allows practice owners to approach the final stages of their sale with realistic expectations and greater confidence.