Understanding the Significance of LOIs in Veterinary Practice Sales

As a legal advisor in veterinary practice transitions, I recognize the importance of a well-crafted letter of intent (“LOI”) in initiating and formalizing the sale process. Herein, you can learn a little bit about the significance of a letter of intent in veterinary practice sales and its key components.

1. Initial Agreement and Intent: A letter of intent serves as an initial agreement between the buyer and seller, expressing their intent to negotiate and pursue the sale of the veterinary practice. It outlines the basic terms and conditions of the proposed transaction, including the purchase price, payment terms, and other key provisions.

2. Framework for Negotiation: The LOI provides a framework for further negotiation and due diligence, guiding the parties in discussing and refining the terms of the sale. It also helps streamline the negotiation process by identifying areas of agreement and highlighting issues that may require further discussion or clarification.

3. Confidentiality and Exclusivity: You should look to include provisions in the LOI to maintain confidentiality regarding the sale process and restrict the seller from soliciting other buyers (so-called “exclusivity”) during the negotiation period. Always specify the duration and scope of exclusivity, ensuring that both parties are committed to negotiating the sale in good faith.

4. Due Diligence and Investigation: The parties should outline the due diligence process in the LOI, including access to financial records, client lists, contracts, and other relevant documents. They must also clarify the rights and responsibilities of both parties regarding the exchange of information and the timing of due diligence activities.

5. Binding vs. Non-Binding: It’s important to determine whether the LOI is intended to be binding or non-binding on the parties. A binding LOI may include provisions such as confidentiality, exclusivity, and the obligation to negotiate in good faith. A non-binding LOI allows either party to walk away from the transaction without liability if negotiations are unsuccessful. At Newton’s Law, we usually seek a hybrid approach: a generally non-binding LOI that includes just a couple binding provisions–confidentiality and exclusivity of dealing.

6. Legal Review and Consultation: Whether it is Newton’s Law or another healthcare attorney, veterinarians need to seek guidance from an attorney experienced in veterinary practice sales to draft or review the letter of intent. This step is necessary to ensure that the LOI accurately reflects the parties’ intentions, protects their interests, and lays the groundwork for a successful sale transaction.

7. Next Steps and Formal Agreement: Once the LOI is signed, the parties can proceed to negotiate and finalize the terms of the formal purchase agreement. The LOI serves as a roadmap for drafting the purchase agreement, ensuring that the final document reflects the parties’ negotiated terms and conditions. By setting many terms forth in the LOI, you can avoid protracted and expensive negotiations when the lawyers really get to work in legal provisions of the purchase agreements.

Conclusion: A letter of intent plays a crucial role in veterinary practice sales, providing a framework for negotiation, due diligence, and the eventual sale transaction. By understanding its significance and key components, both buyers and sellers can navigate the sale process effectively and lay the groundwork for a successful transaction. Finally, always get the right lawyer on your side to be sure your interests are protected as early as possibly–even in negotiating the LOI. In the long run, this will save you significant stress and expense down the road.