In the world of medical, dental, and veterinary practice transactions, the path to a successful closing is rarely determined by price alone. While valuation and economics are undeniably important, the true determinant of a transaction’s outcome is often far more subtle: sequencing. The order in which decisions are made, risks are surfaced, and stakeholders are engaged can mean the difference between a smooth, value-preserving closing and a deal that stalls, unravels, or collapses entirely.

This article explores the critical concept of deal sequencing, identifies the most common points of failure, and provides practical guidance for buyers, sellers, brokers, lenders, and advisors involved in sophisticated healthcare practice transactions. By understanding where and why sequencing breaks down, stakeholders can proactively mitigate risk, preserve leverage, and protect the value and relationships at the heart of every deal.

Understanding Deal Sequencing: More Than Just a Timeline

At its core, deal sequencing is not about speed or efficiency for its own sake. Rather, it is about the deliberate and strategic ordering of decisions and actions so that each step in the transaction process is informed by the right information, at the right time, and in the right context.

Deal sequencing determines:

• Which decisions inform subsequent steps
• When and how risks are identified and addressed
• How leverage is preserved or lost throughout the process
• The degree to which uncertainty is reduced or deferred at each stage

In a well-sequenced transaction, each step builds upon the last, reducing uncertainty and aligning expectations. In a poorly sequenced transaction, uncertainty is merely deferred, and each step becomes a potential source of friction, renegotiation, or breakdown.

Most deal failures are not the result of bad intentions or lack of sophistication. Rather, they stem from decisions made too early, too late, or without the necessary inputs. The following sections examine the most common sequencing failures in medical, dental, and veterinary practice transactions, why they occur, and how they can be avoided.

1. Negotiating Price Before Understanding Financing Realities

One of the most pervasive sequencing failures in healthcare practice transactions is the premature negotiation of price before the realities of financing are fully understood. In these transactions, lenders are not passive sources of capital; they are active gatekeepers who impose practical constraints on purchase price, buyer liquidity, cash flow distribution, and post-closing compensation.

Why This Happens

• Sellers, eager to maximize value, anchor to a high price early in negotiations.
• Buyers, motivated by competition or fear of losing the deal, agree to terms before consulting with lenders.
• Brokers, seeking to maintain momentum, communicate certainty to both sides.

The Consequences

When lenders finally underwrite the transaction, they introduce constraints that were always present but never acknowledged. Coverage ratios may tighten, add-backs may be challenged, and buyer income expectations may be revised downward.

Adjustments at this stage feel like retrades rather than necessary alignments, leading to frustration, mistrust, and sometimes deal collapse.

The psychological commitment to the original price makes renegotiation difficult, even when the underlying economics have changed.

Practical Example

A dental practice is listed for $2 million. The buyer, eager to secure the deal, agrees to the price and signs a letter of intent. Only after the LOI is signed does the buyer approach a lender, who informs them that, based on cash flow and risk profile, the maximum loan available is $1.7 million. The seller, having anchored to $2 million, is reluctant to reduce the price, and the deal stalls.

Best Practice

Engage lenders early in the process, before price is finalized. Use lender feedback to inform price discussions, ensuring that all parties are negotiating within the bounds of financial reality. This preserves credibility, reduces the risk of retrades, and increases the likelihood of a successful closing.

2. Signing Letters of Intent Before Achieving Structural Alignment

Letters of intent (LOIs) are often treated as procedural milestones—boxes to be checked on the way to a definitive agreement. However, LOIs create psychological certainty and set expectations, even when they are non-binding. When critical structural issues are deferred until after the LOI is signed, they become much harder to resolve.

Commonly Deferred Issues

• Entity structure and ownership transitions (e.g., asset sale vs. stock sale)
• Post-closing employment and compensation arrangements for selling doctors
• Retention and productivity assumptions for associates and staff
• Treatment of working capital, accounts receivable, and payables
• Earn-outs, seller notes, and contingent payments

The Consequences

Issues that could have been addressed cleanly upfront now feel like changes to agreed terms. Parties become entrenched in their positions, making compromise more difficult. The risk of deal fatigue increases as negotiations drag on.

Practical Example

A veterinary practice LOI is signed with the assumption that the seller will remain as an employee for three years post-closing. Only after the LOI is signed does the seller reveal that they plan to retire within 12 months. The buyer, who based their valuation on the seller’s continued involvement, must now renegotiate terms or walk away.

Best Practice

Use the LOI stage to achieve alignment on all material structural issues, not just price. This includes entity structure, employment terms, retention strategies, and working capital treatment. A well-crafted LOI reduces uncertainty and sets the stage for a smoother diligence and closing process.

3. Launching Diligence Without Prioritization

Diligence is a critical component of any practice transaction, but not all diligence items are created equal. When diligence is launched without a clear order of operations, teams often spend valuable time on low-impact issues while high-impact risks remain undiscovered.

Types of Diligence

• Deal-critical diligence: Items that affect lender approval, deal structure, or purchase price (e.g., financial statements, regulatory compliance, payer contracts).
• Operational diligence: Items that affect post-closing operations, integration, and long-term risk (e.g., HR policies, IT systems, vendor contracts).

The Consequences

High-impact risks surface late, often when timelines are compressed and leverage has shifted. Even manageable issues become negotiating leverage for the other side. The deal team is forced into reactive problem-solving, increasing stress and costs.

Practical Example

A medical practice buyer spends weeks reviewing vendor contracts and IT systems, only to discover late in the process that a key payer contract is non-transferable, jeopardizing the entire deal.

Best Practice

Prioritize diligence items that have the greatest impact on deal viability. Sequence diligence so that deal-critical risks are surfaced and addressed early, before significant time and resources are invested in lower-priority items.

4. Involving Advisors Too Late

Late involvement of legal, financial, or strategic advisors is a consistent indicator of sequencing failure. When advisors are brought in after price, structure, and timelines are set, their role becomes reactive rather than proactive.

The Consequences

Advisors surface risks that were always present but now feel disruptive to the process. Solutions are limited because flexibility has already been surrendered. Costs increase as timelines compress and advisors are forced to work under pressure.

Practical Example

A dental practice seller negotiates a deal directly with a buyer, only to bring in legal counsel after the LOI is signed. The attorney identifies significant regulatory and tax issues with the proposed structure, requiring a complete renegotiation of terms.

Best Practice

Engage core advisors early in the process, ideally before the LOI is signed. Early advisor involvement allows for strategic input on structure, sequencing, and risk mitigation, increasing the likelihood of a successful outcome.

5. Treating Real Estate as a Secondary Workstream

In many practice transactions, real estate is treated as a separate or secondary workstream, to be addressed after the “main deal” is negotiated. This is a critical mistake, as real estate issues often have a direct and material impact on deal viability.

Key Real Estate Issues

• Lease assignments and landlord approvals
• Rent resets and escalation clauses
• Purchase options and right of first refusal
• Term alignment with the practice sale

The Consequences

Real estate issues surface late, introducing third-party risk that cannot be controlled by the deal principals. Landlords may delay approvals, renegotiate terms, or refuse assignments. Lenders may pause underwriting or require additional conditions.

Practical Example

A veterinary practice buyer assumes the lease can be assigned, only to discover late in the process that the landlord requires a significant rent increase as a condition of assignment. The increased rent undermines the buyer’s cash flow projections and jeopardizes lender approval.

Best Practice

Address real estate issues in parallel with the main transaction, not after. Engage landlords early, review lease terms, and ensure alignment between the practice sale and real estate arrangements.

6. Treating Financing as a Back-End Process

Even when financing is acknowledged early, it is often sequenced incorrectly. In many deals, buyers engage lenders only after the LOI is signed and diligence is underway, forcing lenders to react to a structure they did not help design.

The Consequences

Lenders may impose revised conditions, delay approvals, or require structural changes late in the process. The deal team is forced to renegotiate terms or accept less favorable financing. Closing timelines are extended, increasing costs and risk of deal fatigue.

Practical Example

A medical practice buyer structures a deal with a large seller note, only to discover that the lender will not approve the transaction unless the seller note is subordinated or reduced. The parties must renegotiate terms, delaying closing and increasing tension.

Best Practice

Involve lenders early and treat financing as a core component of deal structuring, not a back-end process. Use lender feedback to inform price, structure, and timeline expectations from the outset.

7. Setting Timelines Before Mapping Risks

Aggressive closing timelines are often used to maintain momentum and demonstrate commitment. However, when timelines are set before all risks are fully understood, they incentivize shortcuts and create pressure to overlook or defer critical issues.

The Consequences

Unresolved risks surface late, leading to delays, retrades, or rushed decision-making. Parties may feel compelled to accept unfavorable terms to meet arbitrary deadlines. The risk of post-closing disputes and integration challenges increases.

Practical Example

A dental practice transaction is scheduled to close in 30 days, but key regulatory approvals and landlord consents have not been obtained. As the closing date approaches, the parties are forced to extend timelines or close with unresolved contingencies, increasing post-closing risk.

Best Practice

Map all material risks and dependencies before setting closing timelines. Build flexibility into the process to accommodate unforeseen issues, and avoid using aggressive timelines as a substitute for thorough risk management.

8. Allowing Communication to Become Reactive

Sequencing failures often manifest in communication patterns. In well-sequenced deals, communication is proactive, transparent, and anticipatory. In poorly sequenced deals, communication becomes reactive, fragmented, and slow.

The Consequences

Stakeholders become misaligned, leading to confusion and mistrust. Lenders and third parties lose confidence in the deal team’s ability to manage the process. Issues that could have been addressed early become sources of last-minute crisis management.

Practical Example

A veterinary practice buyer fails to communicate a change in financing terms to the seller until late in the process. The seller, feeling blindsided, questions the buyer’s credibility and considers walking away from the deal.

Best Practice

Establish clear communication protocols and ensure that all stakeholders are kept informed of key developments. Anticipate questions and surface issues early, rather than waiting for them to become problems.

How Sequencing Failures Compound

Each of the sequencing failures described above may appear manageable in isolation. The real danger lies in their interaction. Price misalignment interacts with financing constraints. Structural deferrals collide with diligence findings. Compressed timelines amplify every unresolved issue.

By the time problems become visible to all parties, leverage has shifted and optionality has narrowed. Even experienced deal teams struggle to recover. At that stage, transactions may still close, but often under worse terms, higher costs, and strained relationships.

Why Sequencing Determines Outcomes

The most successful medical, dental, and veterinary practice transactions are not those without complexity. Rather, they are those in which complexity is addressed in the right order. Proper sequencing surfaces risk early, preserves leverage, reduces renegotiation, and protects relationships. Poor sequencing does the opposite, compounding risk and eroding value at every stage.

Conclusion: Sequencing Is Strategy

Deal sequencing is not an administrative detail—it is a core element of transaction strategy. When decisions are made in the right order, transactions move efficiently, even when challenges arise. When sequencing breaks down, friction is inevitable, and the risk of failure increases.

The difference between a successful and a failed transaction is not experience alone, but discipline in sequencing. By understanding and applying the principles outlined in this article, buyers, sellers, brokers, lenders, and advisors can proactively identify and mitigate sequencing risk, preserving value and relationships in even the most complex practice transactions.

Morgan Advisory Group represents sophisticated medical, dental, and veterinary practice owners, investors, and professional partners in complex transactions. The firm provides legal, financial, and strategic guidance designed to align deal sequencing, preserve leverage, and protect outcomes.

Schedule a transaction review to identify sequencing risk before it disrupts your deal.

If you would like a detailed checklist or a customized sequencing plan for your specific transaction, please reach out for a confidential consultation.