WHAT YOU ACTUALLY KEEP
Dental Practice Deal Structures
When you sell a dental practice, the headline price is split across several mechanisms — cash at close, an escrow holdback, an earnout, and rollover equity. How much you actually keep depends on the structure as much as the multiple.
A DSO's $2.4M offer and a private buyer's $2.0M offer can leave you with the same money — or the larger one can leave you with less. This guide defines each component, explains asset sale versus stock sale, and shows where the headline number quietly shrinks before it reaches your account.
THE FIVE COMPONENTS
How a Purchase Price Is Split
| Component | What It Is | Typical Range | When You Get It |
|---|---|---|---|
| Cash at close | Money wired at closing | 40–60% of headline (DSO) | At close |
| Escrow holdback | Buyer's recourse reserve | 15–20% (median ~10–12%) | 24–36 months, if no claims |
| Earnout | Contingent on post-close performance | Larger when owner-dependent | 2–3 years, if targets met |
| Rollover equity | Reinvested stake in the parent | 20–40% | At next recapitalization (~5 yrs) |
| Working-capital true-up | NWC adjustment vs. the peg | ~1% of deal value (median) | ~60–90 days post-close |
Source: Precision Dental Analytics, compiled from 500+ evaluations and published M&A data (SRS Acquiom 2025 Deal Terms Study; FOCUS Investment Banking).
STRUCTURE
Asset Sale vs. Stock Sale
Asset Sale
The buyer purchases the practice's assets — equipment, patient records, goodwill — not the legal entity. It is the most common dental structure.
- Buyer receives a stepped-up tax basis on the assets.
- Certain liabilities (escheatment of aged patient credits, some payroll exposure) can stay with the seller.
- Purchase-price allocation across asset classes drives each side's tax outcome.
Stock / Equity Sale
The buyer purchases the entity itself and steps into its full history — assets and liabilities together.
- Buyer inherits the entity's liabilities, including successor liability for issues like associate 1099 misclassification.
- Often simpler for transferring contracts, payer credentialing, and the entity's tax attributes.
- Because the buyer takes on more risk, diligence is heavier and indemnities are broader.
Which structure — and how the price is allocated — materially changes your after-tax proceeds. Treat the above as the mechanics, not tax advice; confirm the specifics for your situation with your own tax counsel.
WHERE THE MONEY GOES
The Headline vs. the Wire
A $750K-collections practice receives a DSO offer of 3.2× collections — a $2.4M headline. It sounds like a premium over the 0.8–1.2× collections a private buyer would pay. But read the structure: immediate cash at close is roughly half the stated valuation, with the balance in an earnout tied to keeping the doctor producing for two to three years, plus rollover equity in the parent. The headline multiple is real; the cash is not the headline.
Now layer in the due-diligence re-trade: across lower-middle-market deals, 85% see a post-LOI price adjustment (SRS Acquiom, 2025), and a working-capital true-up plus a 15–20% holdback further separate the headline from the wire. This is why the seller who understands deal structure before signing the letter of intent negotiates the components — peg definition, escrow size, earnout metrics — rather than fixating on the multiple alone.
The defense is the same one that protects your valuation: a clean, documented, forensically defensible practice. See Dental Practice Exit Strategy Planning for the full Scenario A vs. B model, and Personal Goodwill for why owner-dependency pushes money into the earnout.
DEEP DIVES
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FREQUENTLY ASKED QUESTIONS
Deal Structure FAQ
What is a holdback (escrow) in a dental practice sale?
A holdback is a portion of the purchase price the buyer keeps in escrow after closing as recourse if your financials or representations do not hold up. In dental and lower-middle-market deals it commonly runs 15 to 20 percent of the price, held for 24 to 36 months; broader M&A data puts the median escrow near 10 to 12 percent of transaction value (SRS Acquiom, 2025). You receive the holdback only if no qualifying claims arise during the escrow period — so a clean, defensible data room directly protects this money.
What is an earnout in a dental practice sale?
An earnout is a slice of the purchase price paid only if the practice hits agreed revenue or EBITDA targets after you sell, typically measured over 2 to 3 years. Buyers use earnouts to shift owner-dependency risk onto the seller: if the practice leans heavily on you, more of the price moves into the earnout, meaning you have to prove the goodwill transfers — with your own cash at risk — before you collect. The less owner-dependent your practice, the more of the price you take as guaranteed cash at close.
What is rollover equity in a DSO transaction?
Rollover equity is the portion of your proceeds you reinvest into the buyer's parent company instead of taking as cash — commonly 20 to 40 percent. It is marketed as the 'second bite of the apple': if the platform grows and recapitalizes (often on roughly a five-year cycle), your retained stake can be monetized at a higher multiple, sometimes 10 to 15 times EBITDA. The trade-off is real risk and illiquidity — rollover equity is only worth what the platform is worth at exit, which you no longer control.
What is the difference between an asset sale and a stock sale?
In an asset sale, the buyer purchases the practice's assets (equipment, patient records, goodwill) rather than the legal entity. It is the most common dental structure: the buyer gets a stepped-up tax basis, and certain liabilities — such as unclaimed-property/escheatment exposure and some payroll issues — can stay with the seller. In a stock (or equity) sale, the buyer purchases the entity itself and inherits its liabilities, including successor liability for matters like associate 1099 misclassification. The allocation of purchase price across asset classes drives the tax outcome for both sides and is negotiated — confirm the specifics with your own tax counsel.
How much of the headline price do I actually receive at closing?
For a DSO transaction, immediate cash at close is frequently only 40 to 60 percent of the stated valuation, with the remainder split across earnout, rollover equity, and an escrow holdback. On top of that structural split, the buyer's Quality of Earnings audit often re-trades the headline number downward during diligence before any of it is paid. The realized value of a deal is therefore best understood as cash at close, plus the holdback you are likely to recover, plus the risk-adjusted value of the earnout and rollover — not the headline multiple.
What is a working capital adjustment in a practice sale?
At closing the buyer trues up net working capital against a negotiated target (the 'peg'); if delivered working capital falls short, the price is reduced dollar-for-dollar. It is one of the most reliable post-close extraction levers: the median purchase-price-adjustment escrow runs about 1 percent of deal value, and roughly 70 percent of buyers prevail on contested working-capital adjustments (SRS Acquiom). Aged patient credits and receivables that are excluded from the peg quietly come out of your proceeds, which is why how working capital is defined in the LOI matters as much as the multiple.
Negotiate the Structure, Not Just the Multiple
The free Defense Gap field guide shows you what a buyer's Quality of Earnings team will flag — the same findings they use to shrink your cash at close and load up the holdback.