We Know DSO Deal Structure
Equity terms, earnout formulas, employment obligations, and the actual likelihood that your equity will ever become liquid. We know what to negotiate and what's non starter territory.
We help dentists navigate DSO sales, understand equity terms, protect clinical autonomy, and structure deals that actually deliver value.
Schedule ConsultationDSO transactions are more complex than traditional practice sales. The deal includes equity rollover, earnouts, employment agreements, and ongoing obligations that last years beyond closing. The DSO's attorney represents the DSO. You need someone in your corner.
Equity terms, earnout formulas, employment obligations, and the actual likelihood that your equity will ever become liquid. We know what to negotiate and what's non starter territory.
Some DSOs let you practice dentistry the way you always have. Others impose treatment protocols and production requirements. The employment agreement determines which version you get.
We handle DSO transactions across the country. You work directly with Connor from start to finish. No passing you off to junior associates.
The main areas where having your own attorney makes a difference
Equity rollover sounds great in theory. You reinvest part of your sale proceeds and get upside when the DSO eventually sells to private equity or goes public. The problem is that most of that equity never becomes liquid.
We analyze the equity terms, explain what happens in different exit scenarios, calculate the discount rate that makes the equity worth what they're claiming, and help you decide if taking more cash upfront makes more sense than betting on a future liquidity event that may never happen.
DSO deals usually include earnouts tying part of your purchase price to future performance. The structure matters a lot because the DSO controls operations after closing. If they can manipulate the metrics, your earnout disappears.
We negotiate objective measurement criteria, operational protections preventing the DSO from tanking your numbers, and security provisions ensuring you have recourse if they don't pay what's owed.
After you sell to a DSO, you're typically required to stay on as an employee for 3 to 5 years. The employment agreement determines your compensation, clinical autonomy, production requirements, and what happens if things don't work out.
Standard DSO employment agreements are heavily one sided. We negotiate better compensation formulas, protect your clinical decision making, and build in exit provisions if the relationship becomes untenable.
If you own the building where your practice operates, the DSO deal can include selling the property, leasing it back to the DSO, or keeping it and collecting rent. Each option has different tax implications and long term consequences.
We help structure the real estate component in a way that makes sense for your financial situation and coordinate it with the overall transaction.
Schedule a consultation to review your letter of intent, discuss deal structure, and figure out what terms actually make sense for you.
Schedule ConsultationWhat to expect when working with us on your DSO transaction
We review your LOI or term sheet, analyze the economics of the deal, and explain what you're actually being offered versus what the DSO's pitch deck claims. Then we develop a negotiation strategy based on your priorities.
We break down the equity terms, calculate what the rollover is actually worth under different scenarios, and analyze the earnout structure to identify problems. This is where a lot of the value gets lost if you don't pay attention.
The DSO's attorney will draft the purchase agreement. We review it, mark it up, and negotiate terms that protect you. This includes indemnification caps, escrow amounts, earnout protections, and dispute resolution provisions.
We negotiate your employment terms including compensation formula, production requirements, clinical autonomy protections, termination provisions, and post employment restrictions. This governs your life for the next 3 to 5 years.
We handle the closing paperwork, coordinate with the DSO's counsel, and make sure everything closes correctly. If issues come up after closing, including earnout disputes or employment problems, we're still here.
DSO deals often offer higher total purchase prices when you include the equity rollover, but most of that value is speculative. The cash portion might actually be lower than what an individual buyer would pay.
DSOs also require you to stay on as an employee for years, restrict your clinical autonomy to varying degrees, and tie part of your compensation to future performance you don't fully control. Individual buyers typically offer cleaner exits.
Equity rollover means you reinvest part of your sale proceeds into the DSO's parent company. You get equity that could appreciate significantly if the DSO eventually sells to another private equity firm or goes public.
The problem is that your equity is illiquid and may never pay out. Most DSO equity requires a liquidity event to have value, and those events are uncertain. Some DSOs never sell. Others sell but at valuations that don't deliver the returns promised.
It depends entirely on what's negotiated in your employment agreement. Some DSOs allow significant clinical freedom. Others impose treatment protocols, preferred vendors, production requirements, and insurance participation mandates.
The DSO's pitch will emphasize autonomy. The employment agreement is what actually matters. We make sure the contract reflects the autonomy you were promised.
That's a real risk. If the DSO doesn't sell to another buyer or go public, your equity could remain worthless paper indefinitely. You gave up cash at closing in exchange for equity that never pays out.
That's why we focus on the cash portion of the deal and discount the equity heavily. The equity might work out great. But you can't count on it the way you can count on cash.
Deep dives into specific DSO transaction issues
DSOs sell the equity rollover as your chance to participate in the upside when they eventually exit. The pitch includes projections showing your equity multiplying 3x or 5x when the DSO sells in a few years.
Reality is different. Your equity is illiquid until a liquidity event happens. That event requires either the DSO selling to another private equity firm, going public, or getting acquired by a larger DSO. Many DSOs never achieve any of those outcomes.
Even if a liquidity event happens, it might not happen at the valuation you were told to expect. Private equity returns are good on average, but individual deals fail all the time. The DSO you sell to might underperform, face industry headwinds, or get caught in a down market when it tries to exit.
And if you leave employment before the liquidity event (voluntarily or involuntarily), your equity might be subject to forfeiture provisions or forced buyback at deflated valuations. The equity only really works if you stay employed until exit AND the exit happens at good valuations.
Earnouts in DSO deals are usually tied to EBITDA or collections over 2 to 3 years post closing. The problem is that the DSO controls everything after closing. Staffing, fees, marketing, operations. All of it.
They can make legitimate business decisions that happen to tank your earnout. Cut marketing spend. Raise staff costs. Integrate the practice into their platform in ways that change the economics. Lower fees to be consistent with their insurance contracts.
None of that violates the purchase agreement because they're running the practice. But it destroys your earnout.
That's why earnout structure matters. Objective metrics like collections are better than EBITDA. Operational covenants that prevent certain changes during the earnout period help. Security provisions like escrows give you recourse if they don't pay.
After you sell to a DSO, you're required to stay on as an employee typically for 3 to 5 years. That employment agreement determines your quality of life for the foreseeable future.
Standard DSO employment agreements are terrible. Below market compensation formulas. Vague production requirements. Broad restrictions on clinical decision making. No protection if they terminate you. And non competes that prevent you from working anywhere nearby even if they fire you.
Most sellers don't negotiate the employment agreement hard enough because they're focused on the purchase price. That's a mistake. You're about to spend years working under those terms.
We negotiate compensation formulas that are actually fair, protect your clinical autonomy, build in termination protections, and limit the non compete to something reasonable. If you're going to work there for years, the employment terms matter as much as the purchase price.
If you own the building where your practice operates, the DSO deal usually gives you three options. Sell the property to the DSO. Lease it back to them after closing. Or keep it and collect rent from them as a separate landlord tenant relationship.
Each option has different tax implications, risk profiles, and long term outcomes. Selling gives you immediate liquidity but you lose the property. Leasing it back creates ongoing income but ties you to the DSO's performance as a tenant. Keeping it as a landlord preserves the asset but creates management obligations.
The right answer depends on your tax situation, desire for ongoing income, and confidence in the DSO's long term viability. This should be part of the overall deal strategy, not an afterthought.
DSO employment agreements typically require you to stay for 3 to 5 years. If you leave voluntarily before that, you usually forfeit unvested equity, lose earnout rights, and trigger the non compete.
If they terminate you without cause, the consequences vary depending on what's negotiated. Bad agreements treat voluntary and involuntary termination the same. Better agreements waive the non compete and preserve earnout rights if you're fired.
And if you're terminated for cause, you lose everything. The problem is that cause is often defined broadly enough that the DSO can manufacture it if they want you gone.
We negotiate provisions that protect you if things don't work out. At minimum, you shouldn't lose earnout rights and be restricted from working if they decide to terminate you.
Tell us about your DSO offer and we'll set up a call to discuss how we can help.