Podcast

Jun 4, 2026

Roetzel HealthLaw HotSpot: Understanding Letters of Intent in Health Care Transactions

Host Ericka Adler is joined by Roetzel shareholder Jonna Eimer to discuss letters of intent (LOIs) in health care transactions and the common misunderstandings that can arise before a deal reaches the final agreement stage.

The episode explores what health care providers should understand before signing an LOI, which terms are most important to address early, and how due diligence can shape the final transaction. Ericka and Jonna also discuss the importance of working with trusted legal and financial advisors, managing expectations throughout the process, and avoiding common pitfalls between signing an LOI and closing a deal.

To watch the episode on YouTube click here or on Apple Podcasts click here. To listen to the podcast, click here.

Transcript

Ericka Adler:
Hi, everyone. Welcome to the HealthLaw HotSpot. I'm Ericka Adler, shareholder and leader of the health care practice group of Roetzel & Andress, and today I'm joined by health care partner Jonna Eimer, who's going to talk with me about letters of intent, and some of the unusual and challenging aspects that we face when clients sign an LOI that they don't understand, when they surround themselves by a team that gives conflicting or incomplete information, and some of the misunderstandings that sometimes arise between the time that you sign an LOI and when you receive the actual deal document. So that's a lot to cover, but we're going to dive right in. How does that sound?

Jonna Eimer:
That sounds great. Thanks for having me, Ericka.

Ericka Adler:
Alright, perfect. So, we have a lot to cover. First, let's talk about the LOI. We know what the basic terms are, and I've covered this in podcasts before. What are some of the issues that you see where people don't understand what they're signing in an LOI that can often lead to misunderstanding and maybe even a failure of the deal?

Jonna Eimer:
Yeah, well, what I see is people often, because everyone's so excited in the beginning of the deal stage, right? that they want to sell, the buyer wants to buy, and they sometimes can rush into this LOI, and they often get stuck on that provision that says this is non-binding.

Which, you and I know is hopefully non-binding, but depending on how it's worded. But I think that often can make people just jump in maybe a little too quickly to sign without really thoroughly understanding the terms of the LOI, and understanding that the other side might have really strong expectations that those terms will stay in. And you might think, oh, we'll figure them out. That's what some people feel like that's what non-binding means, that they're not the final terms. But oftentimes, an expectation is created, and that expectation then also can reduce your leverage later on if you really did think you had a lot of room to change these terms. So that's one of the first things that I think I encounter, and you and I have talked about this, and how we really feel strongly about making sure the client understands what they're signing early on.

Ericka Adler:
Right, I think that's important, and I think the expectation is that at least the business terms are going to be honored. There won't be any major swings, but sometimes there are things that come up with due diligence that can lead to changes, of course. I think, you know, a lot of times, there's just not a lot of information in the LOI. There's only some basic terms, so when you're trying to explain to the client, you can only explain what's there, and a lot of times we get pushback when we try and ask questions or try and see if we can get some more information. And they'll say, well, let's just get this signed, and that'll be worked out in the documents. And unfortunately, that is often what precipitates an LOI being signed without a full understanding, and it's nobody's fault. Just sometimes, you know, only the basic terms are worked out, and then when the buyer, for example, starts talking to their tax and financial and legal advisors, and they put some meat on the bone, so to speak, it turns out to be something different than perhaps the seller had imagined. So, there's really no misleading intent in the LOI, it's just sometimes once the deals are worked out, it's not what both parties anticipated.

Jonna Eimer:
Yeah, and I think that's exactly the case, right? There's some vagaries that we'll deal with later on and we flesh them out as time goes on in the due diligence process, which is the point of due diligence, right? So, we shouldn't expect that the LOI goes through every single term or every expectation of the deal. That is exactly the point of due diligence- to get into that process.

But the big picture items we want an understanding of moving forward. But definitely the details, that's what we uncover, and that's what your advisors and lawyers are doing as you move into that diligence process, because not every term or detail or implication or tax effect, or the way the consideration is paid, or earnouts, all those exact details are not going to be figured out in the LOI. So, we certainly are meaning we need to do that. We just want to kind of be all going in the same direction. And that's where you and I have said, we always advise, too, our clients to quickly, obviously, have us involved, and we'll do whatever we can to guide you correctly. But also bring in your accountants and financial advisors early on, if possible, to guide you from that perspective as well.

Ericka Adler:
Right, I agree. And, you know, oftentimes the clients want to negotiate the LOI themselves, so you may make a couple of questions and comments, but then next thing you know, it's signed. And a lot of the reason for this is that the buyer's businesspeople are the ones negotiating on the other side. They're not really involving their legal counsel, so sometimes there is a disconnect between the offer that's made and actually how it needs to be structured legally, tax-wise and otherwise, and that can sometimes create a bump in the road once we actually receive a legal document. That can be the disconnect that ends up occurring, which happens pretty often, but, you know, 99% of the time experienced lawyers’ kind of work through these issues that were not fleshed out at the LOI stage, and kind of figure things out. And that's really part of the expected process. 

So, I think for clients that think that they sign the LOI, and then the documents come, and they exactly match the LOI, and we close. Like, that is not it at all. There's legal work, there's discussion, there's tax review, there's structuring of the entities that has to be involved, and I think clients need to understand that it is a process that's quite involved.

Jonna Eimer:
Yeah, and the businesspeople, like what you're saying, they often do want to get this signed and accomplished, and they're not wrong, and we're here to help them with that. We're not trying to get in the way of deals moving forward, but these businesspeople may have multiple deals in multiple jurisdictions, and they might draft a very general LOI without a firm understanding of the laws of a particular state or area, and how they might affect the intricacies of that LOI.

Which you and I know, because we know Illinois and other places where we're doing deals have specific rules and implications with respect to how these deals can be structured, and that can affect how the ultimate deal documents might look.

Ericka Adler:
Right, and I would say, even if the LOI doesn't go into enough detail or spell things out, there's solutions to everything. There's a way to structure every deal. I think part of the issue is that everybody has to remain flexible, and if you're inflexible, that can kill a deal. So, I think going into it, there needs to be an understanding that these are basic terms, some things may change, but the parties are going to work together in good faith to achieve what was ultimately the goal. And I think if everybody is very black and white about it has to be this way, because I expected it to be this way, then it's unlikely that a deal can be done.

Jonna Eimer:
Yeah, and if a client really does have a firm belief or expectation of a particular point, that it's important for them to communicate to you or I or their legal team that, but for this particular provision, I wouldn't do the deal, right? Because we don't know that, and we know all of us know a lot of smart people, we might be getting other advice, and if you're not sharing that with your legal team or your accounting team, we don't know that that was the most important part of this deal for you.

So you have to, while I caution you to have too many people whispering in your ear as a client, because sometimes those people they have very different deals or different laws apply, or they're not telling you the whole story, so certainly, you know, I'm not saying don't listen to other sophisticated, smart people, by all means do, but share those conversations with your direct advisors so we are in on it together and can guide you. And if there is a very, very important part of this deal that you really need to happen, then we would, of course, focus on that right away to make sure that that, at least, was clear from the start.

Ericka Adler:
I think that's really important, and I've always emphasized that you need a team, but you also need to trust your team, and if you're not going to trust your team, then that's not the team for you. It's really difficult to represent a client when they listen to everybody's advice but yours and your experience in doing these kinds of deals. So, I always recommend a great accountant. And when I say accountant, there are accountants who do, like, file your taxes, right? That's not necessarily the right kind of accountant who's going to help you through a deal to understand the structure and the tax implication, and lawyers, although some do, really need to stay in their lane and give the legal advice, and should not be giving the financial advice. Plus, we don’t have access to the client's financials. We don't know what their tax status is. We don't know what their numbers look like, and what the ultimate amount of taxes are that they could end up paying, right? We don't have that information, so we do need to work together, but I think it's important to understand the role that each party plays, and to have those people talk to each other so everybody's kind of on the same page. And I know that we usually work with a tremendous team of financial advisors. When we do these deals, we always can make great recommendations on people who help get deals done, and I think that's really the key thing. You want to surround yourself with a team of deal makers, not deal breakers. There are solutions to every problem, but if you're not going to work to find a solution, then there won't be one, right?

Jonna Eimer:
Yeah, yeah, I think that's a great point, because while there's a lot of smart lawyers, a lot of smart accountants, but if they don't have the experience in the area that you need, they can't necessarily advise you on your particular deal. So while they might be really good accountants for your day-to-day and your business needs, when you're doing a health care transaction, if they don't have experience in those particular deals, they might not be able to guide you as effectively as someone who's doing deals like this all the time, and really knows what to look for.

Ericka Adler:
Right? So, when we're looking at an LOI, what would you consider to be these central elements that are the things that you should not expect to change. You know, from my perspective, I expect to understand what the purchase price is or at least how it's being computed. I expect to understand whether everybody's being retained, like all the sellers that they're staying on. I expect to know if there's going to be rollover units, what percentage of the purchase price is being allocated to that, right? I would expect to know if we're going to see some restrictions, whether it's non-compete or otherwise. And I don't expect the detail on it, but just to mention that that's going to exist in there. So, from and also if the compensation of the sellers going forward is an important element, I would expect that either we're told they're going to maintain how they're currently getting paid, or some mention of how that's going to be computed, because the deal is not only the purchase price, but if you're committing to 5 years, how you can expect to be paid for those, you know, 5 years. And speaking of 5 years, how long a commitment is being made. So, I would expect those things to be there.

I'm sure you have other things you'll tell me in a second, but I also expect that almost everything else could change. You know, how exactly we're going to make the payments, is some of it going to be tied to an earn-out? Of course, some mention of that in the LOI is quite nice. Who else is being hired? You know, I would expect in the LOI to see, is there going to be some money put aside, and what percentage for escrow, right? But really, there's, like, maybe 5% of the deal is in that LOI, and the rest of it is not. Would you agree with that?

Jonna Eimer:
I do agree, and I agree with you that primarily we want to see those key business terms included, and for those, I think there's a real expectation that those will not change unless something really significant came out in the diligence process to change everyone's understanding of the business terms in the financial deal. But the business terms, definitely, I expect to see those in the LOI. I expect to see, like you said, the non-compete and employment compensation issues generally, going forward, what those expectations are. And then another thing is the liabilities, right? What liabilities are we taking or not taking with respect to taxes or employees? All those, I expect, even if we're not going to itemize them, right? Are we expecting to take a lot of the liabilities, or really none? And are we taking the assets and no liabilities other than those specifically documented in our transaction documents? So, I think those are very important. And are there any excluded assets? So, you and I have both been involved in deals where there's certain assets that are not part of the deal. Maybe they're owned individually by someone, or maybe there's real estate that's separate. So, all of those need to be accounted for as well.

Ericka Adler:
Right. And, you know, I would say most of the time, though, we don't really see a lot of detail on liabilities in the LOI; usually we would just see a statement, we're not assuming any liabilities, right? And then they may, at that time, not even know, like, what, you know, what is going to be excluded, because they didn't realize somebody owns a car, or somebody owns the real estate should be mentioned. Like, we'll be taking over a lease, or we'll be buying the building, or something like that, but a sentence. These LOIs are typically 2 pages, maybe 3, right? Yeah. Very, very short. But, you know, generally, I don't see buyers assuming liabilities, at least at the LOI stage. Maybe there’s a reference to subject to diligence, right?

Jonna Eimer:
Generally, something like that, yeah. I will say sometimes, though, we see stuff about whether or not cash or receivables are included or excluded. 

Ericka Adler:
Right.

Jonna Eimer:
Working capital, adjustment at closing, things like that. Again, briefly they might just be touched on, but we might see some mention of that.

Ericka Alder: 
And of course, we would love to dive in and add something that typically is not necessary to get past the LOI stage. We know that’s going to be part of the process, unless there’s something really important. Like you said, if the building being part of the deal, and a long-term 7-year lease being part of a deal, then absolutely, that has to be in the LOI, right? 

Jonna Eimer:
Yeah, yeah. If you wouldn’t do this deal without this provision, then we need to put it in the LOI, and that needs to be communicated to your lawyers because then, of course, we’ll make sure that term is added. Or sometimes, like a big, big provision, like you said, is employees. They want to know really an understanding that all the employees, or at least almost all the employees, will be hired, and on substantially the same terms. That's often a big deal for sellers as well. So, again, if there's something that you feel strongly about as a particular seller, that you wouldn't do this deal without, then we need to make sure that that's in the LOI for certain.

Ericka Adler: 
And there's so many, and it's such a unique thing. Every seller has things that are important to them, and I think for the most part, you know, other than the dollar amount, when the money's going to be paid, when they might close, that's what most sellers really care about. So, even though some of the items we're talking about don't necessarily come up in discussion as being important at the LOI phase, because we know we're going to see more details. 

Alright, so to summarize what we're talking about, surround yourself with a team of knowledgeable people, let them talk to each other, and make sure you trust them. If you don't trust them, and you're going to be listening to everybody but them, then this isn't the team that you should be working with. I say that's the first thing. Second thing, understand that the LOI is going to have some terms, but not all terms, and you need to at least be in agreement with the basic terms that are in the LOI, and you need to let your advisors know if there are certain things that are more important or less important to you, so that they can be touched on in the LOI. With the understanding that you need to remain flexible for when 99% more of the details become available at the time that the agreement is actually provided to you, right? And then, I guess I would say is, you know, those to me are really kind of the key things. What else would you add to that list?

Jonna Eimer:
Everything you're saying, I completely agree with, and then I think just trust the process, right? Things may change, and there's things that we're supposed to do as your advisors, and the back and forth that goes on after the LOI, the diligence process, is when a lot of these more minute details are fleshed out, and allow that it doesn't mean that the LOI wasn't entered into in good faith, or was intentionally misleading. But there are things that the businesspeople jump right into and get into, you know, they want to get the LOI, signed, and that's great, but then allow us to do our jobs and allow us to do that back and forth and diligence process. To clearly flesh out all these details and uncover things that might need to be uncovered that could potentially change the deal. And as you and I have talked about, too, that's an essential part of the process, the diligence is for that for all this information to come to light, including, as you and I discussed, that whether there's the fit there, right? That those are the things, the intangibles, that you can't even account for in the LOI stage. That as you're doing this back and forth post-LOI and in this diligence period, do you fit together as a buyer and seller who are going to be in this long-term relationship, like you said, potentially for 3 to 5 years or more? So, I think those are yeah, I agree with what you're saying.

Ericka Adler:
I think that's important, you know, one of the things is we've done so many of these deals and we've both been practicing about 30 years, and very rarely do they not go through. Very, very rarely. I can, you know, think of just a few instances. Usually, it has to do with things that come up in diligence, maybe regulatory, maybe financial. Sometimes the quality of earnings shows that the purchase price was not justified, and yet the seller is not willing to consider different prices, they're all legit. But sometimes what happens as well is that in the back and forth, you know, the seller and buyer realize they don't really like each other, right? I've had sellers who just don't like the way they're spoken to, they don't like how their concerns are dismissed, and they feel like it's a little bit of a red flag. I'm working with you, but if you won't listen to me now will you listen to me later? And I think that's a great point that you mentioned. It's just also using this process as a way to know whether this is a good fit. It's not all about money. If you're committing to work somewhere for the next five years or whatever it is, you have to be happy living for the next 5 years, so I think that's really important.

Jonna Eimer: 
Yeah, yeah, it's a big decision, it's a big undertaking, and I think it's just important, as you said earlier, to trust your advisors. Each step in this process has a purpose, right? The LOI, the diligence, and the documents, all these things serve a purpose, and we as your advisors are here to help you through that.

Ericka Adler:
Great. Alright, any final thoughts on this?

Jonna Eimer:
No, I think we covered it. I think it was great.

Ericka Adler:
Okay perfect. If anybody has any questions about an LOI they're considering entering into, any assistance that's needed in understanding a transaction, we hope that you'll feel free to reach out to us, and please be sure to check out our other podcasts at ralaw.com. This is the HealthLaw HotSpot, and we'll see you next time.