Heads of Terms When Buying or Selling a Dental Practice: What to Agree Before Lawyers Start Drafting
This guide explains what heads of terms should cover in a dental practice transaction — including deal structure, price and earn-outs, CQC registration, property, employees and associates, goodwill protection, restrictive covenants, due diligence, exclusivity, confidentiality and timetable — so that buyers and sellers can agree the key issues before lawyers start drafting.
Why do heads of terms matter in a dental practice sale?
Heads of terms set the direction of the deal
Heads of terms are a short document setting out the main commercial terms of a proposed transaction. They are sometimes called a letter of intent, memorandum of understanding or term sheet. In a dental practice sale, they are usually prepared after the parties have agreed the headline price, but before the full sale agreement, lease documents and other transaction papers are drafted.
Although heads of terms are usually not fully legally binding, they are still important. They shape expectations, guide the lawyers, influence the timetable and often determine whether the deal starts clearly or becomes difficult later.
This matters because a dental practice sale is not just a transfer of goodwill and equipment. It is a regulated healthcare business whose value may depend on CQC registration, NHS or private income, premises, associates, employees, patient relationships, lender requirements and the seller’s role after completion.
For a buyer, weak heads of terms can mean that important protections are missed until late in the process. For a seller, vague heads of terms can lead to avoidable renegotiation, buyer “price chips” or pressure to accept wider warranties, indemnities or restrictions than expected.
Are heads of terms legally binding?
Some parts may bind the parties, even if the deal itself does not
In most business sales, the commercial terms in heads of terms are expressed as not legally binding. This means that agreeing them does not usually force the buyer to buy or the seller to sell. The detailed legal obligations normally arise later, when the sale agreement and related documents are signed.
However, some parts may be legally binding if the parties intend them to be. This commonly includes confidentiality, exclusivity, responsibility for costs, governing law and sometimes restrictions on contacting staff, patients, landlords or commissioners without consent.
Heads of terms should therefore state clearly which provisions are binding and which are non-binding. Confidentiality, exclusivity, costs and governing law are commonly binding because they regulate behaviour during negotiations. Price, structure, completion date and other commercial terms are often subject to due diligence, finance, CQC, landlord consent and contract.
What deal structure should be agreed first?
The structure affects liability, CQC, tax and what actually transfers
One of the first issues to agree is whether the transaction will be structured as a share purchase or an asset purchase.
In a share purchase, the buyer acquires the shares in the company that owns and operates the dental practice. The company continues to own its assets and remain party to its contracts, but the buyer takes control of the company with its existing liabilities, regulatory history and contractual arrangements.
In an asset purchase, the buyer acquires specified assets, such as goodwill, equipment, stock, contracts, website assets and patient communication channels. This may allow the buyer to choose what it is acquiring, but contracts, property rights, staff, NHS arrangements and regulatory registrations may need separate treatment.
The structure should not be left vague. It affects due diligence, warranties and indemnities, employees, property documents, lender requirements and the regulatory timetable. If heads of terms simply say “sale of the dental practice”, the parties may later discover that they had different assumptions.
What should heads of terms say about price?
The price should be clear, but so should the assumptions behind it
The headline price is usually the most visible term, but it is not enough on its own. Dental practice valuations are often based on assumptions about maintainable profits, patient retention, NHS/private income mix, associate stability, property security and the seller’s involvement after completion.
Heads of terms should explain whether the price is fixed or subject to adjustment. If the price is based on particular assumptions, those assumptions should be recorded. This helps reduce disputes if due diligence later shows that the practice differs from what the buyer expected.
Key price points may include:
• Deposit or upfront payment. If a deposit is proposed, the heads of terms should explain when it is payable, whether it is refundable and what happens if the transaction does not complete. Sellers should not assume that a deposit proves the buyer is fully committed.
• Deferred consideration or earn-out. If part of the price is payable after completion, the amount, timing and conditions should be identified. An earn-out, where part of the price depends on future performance, can be useful where goodwill depends on patient retention or the seller’s handover, but it can cause disputes if the calculation is unclear.
• Retentions or price adjustments. A buyer may ask for part of the price to be retained to cover a known risk, such as property works, employment liabilities or potential clawback. Sellers should understand the amount, duration and release conditions.
What CQC issues should be agreed before drafting starts?
Regulatory timing can control the completion timetable
CQC registration should be considered at heads of terms stage, not after the sale agreement is largely drafted. A buyer cannot assume that the ability to provide regulated dental services automatically passes with the business.
CQC registration is linked to the registered provider, regulated activities and location. The steps required will depend on the transaction structure, whether the provider legal entity changes and whether the buyer is already registered.
Heads of terms should identify who will be responsible for preparing and submitting any CQC applications, notifications or supporting documents. They should also make clear that completion may need to be conditional on the parties reaching the necessary regulatory position.
What should be agreed about the property?
The buyer must be able to occupy and use the premises after completion
The premises are often central to the value of a dental practice. Patients know the location, staff are organised around it, equipment may be fixed into the building and regulatory arrangements may be tied to that site.
Heads of terms should state whether the premises are leasehold or freehold, and how the buyer will obtain occupation rights.
If the practice is leasehold, the parties should agree whether the existing lease will be assigned or whether a new lease will be granted. If landlord consent is needed, the heads of terms should identify who will apply for consent, who will pay the landlord’s costs and what happens if the landlord requires a rent deposit, guarantee or authorised guarantee agreement.
The property section should also flag known issues with lease length, permitted use, alterations, planning, repair obligations, security of tenure and lender requirements.
Completion should not be promised until landlord consent, lender property conditions and required lease or freehold documents are realistically timetabled.
What should heads of terms say about employees and associates?
The team can be central to goodwill and continuity
A dental practice’s value is often closely tied to its people. Associates, hygienists, nurses, reception staff and practice managers may all have patient relationships and influence whether the business continues smoothly after completion.
Heads of terms should set out how employees and associates will be dealt with. TUPE may apply where a dental practice is acquired by way of an asset purchase or other business transfer. Where it applies, employees will usually transfer to the buyer on their existing terms with continuity of employment preserved. The position should be assessed against the structure and facts of the transaction.
The buyer will also want to review associate agreements. Missing or unsigned agreements can create uncertainty about notice periods, remuneration, complaint responsibility, restrictive covenants and whether key clinicians are likely to remain.
Staff and patient communications should also be planned. The parties should agree when employees, associates and patients will be informed, who will communicate with them and how confidentiality will be preserved before any announcement.
How should goodwill be protected in heads of terms?
Goodwill should not be left until the sale agreement
Goodwill is often one of the most valuable parts of a dental practice. It may include patient relationships, reputation, recurring income, brand, referral sources, website assets, phone numbers, the practice name and the continued involvement of key clinicians.
Heads of terms should state what goodwill assets are included in the sale. This may include the practice name, domain names, website, telephone numbers, email addresses, social media accounts, online booking systems, patient communication templates and marketing materials, subject to ownership, data protection and third-party consents.
Restrictive covenants should also be addressed early. These are promises that restrict what the seller can do after completion, usually to protect goodwill. They may include non-compete, non-solicitation and staff non-poaching restrictions.
Restrictive covenants should be no wider than reasonably necessary to protect legitimate business interests, such as goodwill, patient relationships and staff stability. The appropriate duration, geography and scope will depend on the practice, the seller’s role and the goodwill being acquired.
What due diligence conditions should be included?
The buyer’s offer is usually subject to investigation
Most buyers will want the transaction to be subject to legal, financial, tax, regulatory, property and clinical governance due diligence. Sellers should expect this, but they should also ensure the process is proportionate and properly managed.
Heads of terms should identify the key due diligence areas and the main documents the seller will provide. This may include accounts, CQC records, NHS documents, lease papers, associate agreements, employee information, patient-plan contracts, equipment finance documents, software licences and complaints records.
A sensible due diligence clause should make clear that the buyer’s offer is subject to satisfactory investigation, but it should not give the buyer an unlimited ability to renegotiate for any reason. If specific issues are already known, they should be addressed directly in the heads of terms.
Should exclusivity be included?
Exclusivity can protect the buyer, but it should be balanced
A buyer may ask for exclusivity, sometimes called a lock-out period. This means the seller agrees not to negotiate with other potential buyers for a defined period while the buyer carries out due diligence and legal work.
Exclusivity can be reasonable where the buyer is committing time and cost to the transaction. However, sellers should avoid open-ended exclusivity or a period that is too long for the buyer’s realistic timetable.
Heads of terms should specify the length of exclusivity, when it starts, what the seller is prevented from doing and whether exclusivity falls away if the buyer misses deadlines or materially changes its offer.
What confidentiality protections are needed?
Confidentiality is particularly sensitive in healthcare transactions
Confidentiality is important in any business sale, but it is especially sensitive in dental practice transactions. Staff, associates, patients, suppliers, landlords and commissioners may react badly if information is shared prematurely or inaccurately.
Heads of terms should include a binding confidentiality clause or refer to a separate confidentiality agreement. It should control how information is used, who can receive it and how announcements will be handled.
The buyer will need enough information to carry out due diligence, but access should be managed through appropriate confidentiality and data protection safeguards. Patient records require particular care because they are likely to include special category personal data and should not be treated as ordinary commercial information.
What timetable should be agreed?
A target date is useful, but dependencies matter more
Heads of terms often include a proposed completion date. That can be helpful, but it should be realistic. Dental practice transactions often depend on several third parties and workstreams that cannot be controlled by the buyer or seller alone.
The timetable may need to account for CQC steps, landlord consent, lender conditions, property searches, lease negotiations, NHS arrangements, due diligence, staff information and consultation, and preparation of the sale agreement.
A completion date that looks attractive commercially may become unrealistic if these dependencies have not been considered. It is better to agree a target timetable with clear assumptions than to promise a fixed date that later causes pressure and mistrust.
What are common mistakes in dental practice heads of terms?
Most problems come from silence, assumptions or overconfidence
Common mistakes include:
• Agreeing the price without recording assumptions. If the price assumes stable NHS income, secure premises, key associates staying or the seller remaining for a handover, those assumptions should be stated. Otherwise, due diligence findings may lead to disagreement about whether the price should change.
• Ignoring CQC until late in the process. Regulatory steps can affect the completion timetable and should be planned from the outset. Leaving CQC until the sale agreement is nearly complete can create avoidable delay.
• Leaving property terms vague. The buyer needs clear rights to occupy and use the premises from completion. If landlord consent, a new lease or freehold transfer is required, this should be built into the timetable.
• Failing to agree the seller’s post-completion role. If the seller is central to goodwill, the buyer may expect a handover or associate arrangement. The seller may expect a clean exit. This should be addressed before legal drafting begins.
• Treating restrictive covenants as boilerplate. Restrictions on the seller can be commercially sensitive and legally important. They should be proportionate and discussed early.
How JLN can help with dental practice heads of terms
Early legal input can save time and protect the deal
Heads of terms are often the point at which a dental practice transaction becomes real. The parties may be keen to move quickly, but this is also the moment when mistakes can become embedded.
At The Jonathan Lea Network, we advise buyers, sellers, dentists, associates and dental groups on dental practice sales and acquisitions across England and Wales. We can help review, negotiate or prepare heads of terms so that the key legal and commercial issues are addressed before main drafting begins.
We can assist with deal structure, CQC planning, NHS arrangements, property terms, due diligence scope, employee and associate issues, goodwill protection, restrictive covenants, deferred consideration, earn-outs, exclusivity, confidentiality and completion planning.
Speak to JLN before signing heads of terms
The best time to fix the deal structure is before the documents are drafted
If you are buying or selling a dental practice, heads of terms should not be treated as a formality. They can affect the price, timetable, legal drafting, negotiation leverage and the risk of later disputes.
Taking advice before signing heads of terms can help you identify the points that need to be agreed, avoid unrealistic commitments and approach the transaction with greater confidence.
JLN can help you prepare or review heads of terms before you commit to exclusivity, incur significant costs or agree a timetable that may not be achievable. Contact The Jonathan Lea Network to discuss your proposed dental practice sale or acquisition with a member of our team.
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This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited.