Letter of Intent for a Med Spa Purchase

A letter of intent, or LOI, records proposed transaction terms before definitive agreements and full diligence. Its legal effect depends on the actual language and applicable law; some provisions may be binding even when the purchase terms are not. Buyers and sellers should review economics, structure, exclusivity, conditions, confidentiality, and timing with counsel before signing.

What does the letter of intent do?

Letter of intent means a preliminary document setting out proposed terms and the process for a contemplated transaction. Its title alone does not determine enforceability. Counsel should assess which provisions create obligations and which remain subject to definitive agreements and conditions.

The commercial purpose is to establish enough shared understanding to justify further diligence and documentation. An LOI should make major assumptions visible rather than postpone every difficult issue until one party has spent substantial time and money.

The buyer hub places the document within acquisition planning. A seller should also understand what changes when exclusivity begins. A buyer should know what evidence, financing, professional arrangements, and consents it must obtain before the proposed transaction can become a closing.

Which economics must be clear?

Identify the buyer, seller, entities, assets or interests, locations, real estate treatment, price definition, payment forms, assumed liabilities, debt, cash, working capital, and key adjustments. Distinguish an enterprise-value proposal from an equity or seller-distribution figure under the actual wording.

Specify whether consideration includes closing cash, seller financing, an earnout, rollover equity, escrow, or another restricted amount. A seller should not compare the total with an all-cash offer as if timing and risk were identical.

Use the Offer-to-Proceeds Bridge to expose gaps before the proposal becomes exclusive.

How does a simple consideration example help?

Assume an illustrative LOI states a $2,150,000 price: $1,720,000 cash, a $215,000 seller note, and up to $215,000 earnout. If assumed debt payoff is $280,000, expenses are $105,000, and escrow withheld from the cash is $86,000, estimated closing distribution before taxes and other adjustments is $1,720,000 − $280,000 − $105,000 − $86,000 = $1,249,000.

The invented terms do not describe market norms. They show why the seller should not plan around a $2,150,000 immediate receipt. The note carries payment risk and timing; the earnout may never become payable.

Test the wording against the arithmetic. If escrow is already excluded from the stated closing cash, do not deduct it again. Ask what happens if the working-capital calculation changes. An LOI can remain concise while identifying the definitions needed to keep both parties’ financial expectations aligned.

How should exclusivity and diligence be coordinated?

Exclusivity limits the seller’s options under the terms agreed, so connect it to a realistic workplan. Identify the diligence scope, data-room readiness, buyer team, financing milestones, professional-structure review, consent process, and anticipated documentation sequence.

Ask counsel to address duration, extension, termination, permitted communications, and consequences. Do not assume the parties can walk away without obligations because the overall document is called preliminary. A buyer should likewise understand what access and cooperation it receives during the period.

The med spa due-diligence guide helps define a concrete request list. A short deadline is not useful if the seller lacks reconciled membership records or the buyer has not engaged the professionals needed for review. Match the timetable to the remaining questions rather than an optimistic marketing estimate.

Which clinical and entity questions belong early?

Identify the proposed ownership and professional model before relying on a purchase structure. State requirements, owner credentials, services, management relationships, and clinical continuity can affect what can transfer and how the buyer operates afterward.

The CPOM definition and two-entity closing definition organize those questions. The LOI should not promise the transfer of professional authority or patient records as ordinary unrestricted assets without appropriate legal review.

Also identify the seller’s continuing clinical or management role. Specify the expected duration and scope as a negotiating assumption, then coordinate the detailed agreement with counsel. A price that assumes years of seller service is not comparable to an offer allowing an immediate departure. Keep future compensation separate from purchase consideration so the obligations remain understandable.

Why should financing and tax review happen before signing?

A buyer needs an initial funding plan that matches the proposed structure, consideration, working capital, and transition needs. The seller needs to understand financing conditions and which milestones support closing confidence.

The SBA 7(a) overview describes general program uses and eligibility, not approval of a specific LOI. The actual lender should confirm the permitted structure and requirements. Do not negotiate seller notes, contingent payments, or ongoing roles on assumptions that the selected financing cannot support.

The IRS business-sale overview explains differing treatment of assets and transaction forms. Ask the CPA to examine the proposed structure before allocation and payment terms become difficult to change. Early professional review can reveal a material difference between headline price and the seller’s retained proceeds.

What should confidentiality and access provisions address?

Define the disclosure stages, authorized recipients, data use, security, return or retention, and communications with employees, patients, vendors, and landlords. Professional and privacy obligations may require more than an ordinary confidentiality promise.

The SBA’s business-sale guidance emphasizes a comprehensive agreement and consideration of information access and pre-close operations. For the LOI stage, counsel should align the process with the separate confidentiality agreement and applicable requirements.

Use the Med Spa Continuity Risk Map to identify access and handoff dependencies. The buyer can start financial review with aggregated information while more sensitive records follow an appropriate authorized process. Do not assume signing an LOI permits unrestricted access to identifiable patient information or direct contact with every employee.

How should changes to the proposal be documented?

Keep a clear version history and have counsel confirm how amendments, extensions, or accepted changes are recorded. A revised spreadsheet or email summary may not update every provision the parties rely on. Make sure the commercial team and advisors review the same current document.

When diligence changes the price or structure, update the consideration bridge, financing assumptions, working-capital definitions, and seller obligations together. Do not preserve an obsolete headline in marketing notes while circulating a different funds-flow estimate. The seller should understand both what changed and why before agreeing to a revised exclusive process. Likewise, the buyer needs to know which conditions remain open. Consistent documentation reduces the risk that the parties spend the next stage negotiating from different versions of the deal.

What should each party verify before signature?

Buyers should know the initial operating case, professional constraints, funding route, and evidence needed to proceed. Sellers should know the proposed proceeds, restrictions, continuing duties, and buyer conditions. Both should have counsel explain the document’s legal effect.

1. Define entities, assets, interests, and exclusions.
2. Reconcile price, payment forms, adjustments, and seller cash.
3. Identify binding provisions and process obligations with counsel.
4. Match exclusivity to diligence and financing milestones.
5. Address professional structure, privacy, consents, and transition assumptions.
6. Preserve unresolved terms explicitly for the next stage.

The working capital peg definition helps prevent a major adjustment from remaining undefined. A good LOI does not answer every diligence question, but it makes the commercial bargain and remaining conditions clear enough that neither party mistakes a proposal for a completed transaction.

Educational analysis prepared with AI-assisted research for The Med Spa Broker. “Last reviewed” records the source and editorial check date; it does not imply review by an attorney, clinician, or independent appraiser. Read our editorial standards.