HOME CARE

The letter of intent: what to settle before you sign

A letter of intent (LOI) is a buyer's written offer for your agency: price, structure, conditions, and a period of exclusivity. Price and terms are usually non-binding, while exclusivity, confidentiality, and expenses bind you as soon as you sign. Once signed you stop talking to other buyers, so write the EBITDA basis, working capital peg, and licensing conditions into the letter, not into diligence.

Compare letters from several buyers →See where the LOI sits in the sale process →

By Akim Guennani, Founder · Updated November 2026

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36 mo

Window after Medicare enrollment or a majority ownership change in which a home health or hospice sale does not carry over billing privileges

What is a letter of intent, and when does it arrive?

A letter of intent is a short document in which a buyer sets out what it will pay for your agency and on what terms. It comes after the buyer has signed an NDA, read your financials and CIM, and usually met you, and before its accountants, billing reviewers, and lawyers do full diligence and draft the purchase agreement.

In home care the LOI does more than state a price. It decides whether the buyer purchases your company or its assets, which matters because some state licenses and Medicare provider agreements do not move cleanly in an asset deal. It also says which licensing and Medicare approvals must happen before closing and what you will do for the business afterward.

Is a letter of intent legally binding?

Mostly no, but parts of it are. A well-drafted LOI says price, structure, conditions, your employment terms, and the non-compete are non-binding until the purchase agreement is signed, then names the provisions that bind both sides at once: exclusivity, confidentiality, who pays expenses, and governing law, sometimes with a break fee or expense reimbursement you would owe if you walk away. Resist or cap that last one.

The label alone does not protect you. In SIGA Technologies v. PharmAthene (2013), the parties had signed agreements promising to negotiate a license in good faith on the terms of an unsigned term sheet stamped Non Binding Terms on every page. The Delaware Supreme Court held that breaking that promise could support expectation damages, meaning the profits of the deal that was never signed. A good-faith negotiation clause in an LOI can be a real obligation, so the letter should say plainly which sections bind and that neither side must close.

Why is the LOI your point of maximum leverage?

Before you sign, the buyer knows you can pick someone else. After you sign, exclusivity bars you from talking to other buyers, and each week of diligence makes walking away costlier for you than for the buyer: managers notice the data requests, your other buyers go cold, and restarting takes months.

That is why terms left vague in the LOI tend to be settled later in the buyer's favor. Anything you care about, such as cash at closing, how working capital is measured, how long you must stay, and what happens to your caregivers, belongs in the LOI even though it is non-binding. A buyer that signed off on a specific term is much less likely to reopen it.

What should a home care LOI cover?

A complete LOI for a home care, home health, or hospice agency covers the points below. Sample language for each is in the tables further down.

Parties and structure: A named, funded buyer, and asset purchase, stock purchase, or F reorganization.
Price and how it is calculated: Cash-free, debt-free enterprise value, the adjusted EBITDA it relies on, and the working capital target.
Form of payment: Cash at closing, escrow, earnout, seller note, and rollover, each in dollars.
Diligence and conditions: Diligence deadline, financing, state licensing and change of ownership approvals, the Medicare 36-month rule, and payer consents.
Your role and your staff: Your consulting or employment terms, offers to caregivers, and the non-compete.
Binding terms: Exclusivity, confidentiality, expenses, governing law, and when the offer expires.

Do you need an attorney for the LOI?

Yes, and before you sign, not after. Structure, the working capital definition, licensing conditions, and the length of your non-compete are far easier to fix in a four-page letter than in a sixty-page purchase agreement drafted by the buyer's counsel. Ask a healthcare M&A attorney to mark up the letter and your CPA to model the after-tax result of the proposed structure. This guide explains common terms; it is not legal or tax advice.

Sample LOI language: price and payment

The wording in both tables is illustrative, in plain English, to show what each provision does. It is not a template to sign; your attorney should draft or review the real language. The figures assume a personal care agency with $4,000,000 of revenue and $500,000 of adjusted EBITDA.

Provision	Illustrative sample language	What to check
Parties and structure	Buyer, or a subsidiary it forms, will acquire 100 percent of the equity of the Company. Buyer's parent will guarantee Buyer's obligations under the purchase agreement.	Asset, stock, or F reorganization stated outright. A parent guarantee if a newly formed subsidiary signs.
Purchase price	Enterprise value of $2,500,000 on a cash-free, debt-free basis, assuming a normal level of net working capital. Seller keeps cash at closing and repays funded debt from proceeds.	One number, not a range. What counts as debt, such as accrued PTO or Medicare overpayments owed back.
Price basis	The price is based on trailing twelve month adjusted EBITDA of $500,000 as presented in the Company's financial package dated September 30, 2026, including the add-backs listed in Schedule A.	The EBITDA and add-backs in writing, so any price change must be explained against them.
Working capital	The target is the twelve month average of net working capital, calculated with the same receivable reserve policy used in the Company's historical statements, estimated at $450,000.	How the peg is set, which accounts count, and that the same reserve method applies at closing.
Form of payment	$2,000,000 in cash at closing; $250,000 held by a third-party escrow agent for 12 months as the sole source of recovery for general indemnity claims; $250,000 as a three-year seller note at 8 percent, guaranteed by Buyer's parent.	Every piece in dollars, with earnout, rollover, and note terms stated.

Illustrative example: what vague price language costs

The same agency is offered 5.0x adjusted EBITDA, or $2,500,000. LOI A says the price is based on $500,000 of adjusted EBITDA including the owner's excess salary add-back. LOI B says the price is $2,500,000, subject to diligence. The buyer's quality of earnings review disallows $40,000 of add-backs, bringing EBITDA to $460,000. Under LOI B the buyer proposes 5.0x of $460,000, or $2,300,000, a $200,000 cut, with nothing in the letter to push back on. Under LOI A you can defend each add-back against a stated baseline, and if the price still drops, a fall-away clause ends exclusivity so you can call other buyers. The figures are hypothetical.

Sample LOI language: conditions, your role, and binding terms

Conditions are where home care LOIs differ most from other small business LOIs: a buyer of a Medicare-certified agency or a Medicaid waiver provider needs approvals before it can bill.

Provision	Illustrative sample language	What to check
Diligence	Buyer will complete financial, billing, clinical, and legal diligence, including a quality of earnings review, within 45 days of receiving access to the data room.	A deadline, and billing samples limited to a set period and number of charts.
Financing	Buyer has the funds required to close from cash on hand and committed equity. Closing is not conditioned on financing.	Whether financing is a condition; if a bank or SBA loan is involved, the commitment date.
Regulatory approvals	Closing is conditioned on state approval of the change of ownership and the Medicare enrollment filings. Seller confirms that no change in majority ownership has occurred within 36 months of the Company's Medicare enrollment or its last majority change, so 42 CFR 424.550(b) does not apply.	Which licenses and enrollments transfer or must be re-obtained, who files, and by when.
Payer contracts	The parties will identify payer contracts that require consent or notice on a change of control and request consents within 15 days of signing the purchase agreement. Only the contracts listed in Schedule B are closing conditions.	A short named list of required consents, not every contract the agency has.
Your role	Seller will provide transition services as a consultant for six months after closing at $10,000 per month, for up to 20 hours per week.	Length, pay, hours, early termination, and whether any price depends on you staying.
Employees	Buyer will offer employment to substantially all caregivers and office staff at their current pay rates and will honor accrued PTO.	Pay, PTO, and whether key managers must sign agreements before closing.
Non-compete	Seller will not own or operate a home care agency in the counties the Company currently serves for three years after closing, and will not solicit Company employees or referral sources for the same period.	Limited to the service lines and counties you actually sell.
Binding provisions	Only the sections titled Exclusivity, Confidentiality, Expenses, and Governing Law are binding. No party is obligated to negotiate or sign a purchase agreement. This offer expires if not signed within five business days.	A clear list of binding sections, no duty to close, and time for your attorney to review.

How long should exclusivity last?

There is no industry standard for home care, and published guidance varies. Orrick's sale-process guidance for technology companies says usually 30 to 60 days; Offit Kurman says 90-day periods are common and warns that a long period costs the seller opportunities if the deal falls apart. Size yours to the time the buyer needs to finish diligence and sign the purchase agreement, not to closing, since state licensing and Medicare change of ownership filings usually happen after signing.

A re-trade tends to arrive late in exclusivity: the buyer reports a finding, such as disallowed add-backs, slower Medicaid receivables, or missing visit documentation, and proposes a lower price or a larger escrow or earnout. By then your other buyers have moved on. A shorter period, milestones, and a clause that ends exclusivity if the price drops are the practical defenses.

Illustrative example: exclusivity with milestones

45 days of exclusivity, extendable once by 15 days only if the buyer has delivered its diligence request list within 5 days of signing, finished its quality of earnings fieldwork by day 30, and sent a first draft of the purchase agreement by day 35. Exclusivity ends immediately if the buyer proposes a lower price or a materially different structure. The terms are hypothetical.

Red flags in a home care LOI

None of these alone means you should refuse to sign, but each should be fixed or priced first.

Red flag	Why it matters	What to ask for
Price subject to diligence, with no EBITDA basis	Gives the buyer an open door to re-trade	The adjusted EBITDA figure and add-backs the price assumes
Working capital peg not defined	Receivables are large and slow in home care; reserve choices move real money	Peg method, included accounts, and the same reserve policy at closing
Large earnout on metrics you will not control	After closing the buyer sets staffing, rates, and costs	More cash at closing, or a revenue or hours metric with operating covenants
Financing not committed	The deal can die after you have lost your other buyers	Proof of funds or a lender commitment, and no financing condition
Long exclusivity with no milestones	Lets a slow buyer run out the clock	Shorter period, milestones, and fall-away on a price change
Broad non-compete	Can bar you from service lines or counties you never served	Limit to your service lines, counties, and a set number of years
Employment that is really an earnout	Pay or price tied to staying for years, on the buyer's terms	Separate consulting fee from price; protect payments if you are let go without cause
Payer consents as a blanket condition	One slow managed care plan can hold up closing	A named list of required consents and who requests them

A real small home care LOI

Small agency LOIs are rarely public, but Nova Leap Health, a home care consolidator listed on the TSX Venture Exchange, announced the main terms of one. On January 9, 2018 it signed a non-binding LOI for a home care company in the northeastern U.S. with about $3.0 million of unaudited 2017 revenue and $0.45 million of adjusted EBITDA. The price was $2.1 million, about 4.7x that EBITDA: $1.8 million in cash at closing and a $0.3 million promissory note repayable over two years. Closing was subject to financing, final diligence, stock exchange approval, and a definitive agreement.

On February 26, 2018, 48 days later, Nova Leap announced it had bought the business assets of Family Tree Home Care of Shrewsbury, Massachusetts, a private duty non-medical agency, for the same $2.1 million: $0.45 million of cash and a $1.35 million bank loan, which together make up the $1.8 million at closing, plus the $0.3 million seller note. The closing release put Family Tree's 2017 revenue at $3.23 million, down from $3.45 million in 2016, yet the price set against a disclosed EBITDA figure held, and so did the cash and note split. The financing condition was the open risk, and the deal closed because the bank loan did.

How Lartico Capital fits in

With Lartico Capital, a buyer learns who you are only after you approve it and it signs an NDA, and buyers who want to go further send LOIs for you to consider. Lartico Capital does not negotiate the letter or give legal advice, so your attorney reviews the terms. Lartico Capital asks for no exclusivity, retainer, or listing fee, so the only exclusivity you grant is in the LOI you decide to sign.

Sources and methodology

Public transactions provide market context, not a valuation quote for a private practice. Illustrative examples use hypothetical assumptions and are not predictions. This guide is educational and is not legal, tax, accounting, or investment advice.

1. What's the timeline for a sale process? (Orrick). Tech Studio guidance: after the LOI there is an exclusivity period, usually 30 to 60 days.
2. M&A nuggets: exclusivity (Offit Kurman). Exclusivity periods of ninety days are common; too long a period can mean missed opportunities if the deal falls apart.
3. Letters of intent: binding or non-binding (McDonald Hopkins). Confidentiality and exclusivity typically binding; labeling a document a letter of intent does not by itself make it non-binding.
4. Buying a business in the U.S., part 4: letters of intent (Harris Sliwoski). Typically binding: confidentiality and exclusivity, often expenses, governing law, and sometimes break fees; price, structure, and most conditions non-binding.
5. Delaware Supreme Court awards expectation damages for failure to negotiate in good faith (SIGA v. PharmAthene) (Jones Day). May 2013 decision: signed agreements required good-faith negotiation on an unsigned term sheet marked Non Binding Terms; expectation damages available for breach.
6. 42 CFR 424.550, Prohibitions on the sale or transfer of billing privileges (Legal Information Institute, Cornell Law School). Paragraph (b): the 36-month rule for home health agencies and hospices, and its four exceptions.
7. Nova Leap Health Corp. announces execution of letter of intent (LOI) to acquire home care services business in the Northeastern U.S. (Nova Leap Health press release, January 9, 2018 (InvestorNews reprint)). Non-binding LOI: $2.1M price, $1.8M cash at closing and $0.3M two-year note; target revenue about $3.0M and adjusted EBITDA $0.45M; closing conditions.
8. Nova Leap Health Corp. completes purchase of Massachusetts home care business (GlobeNewswire, February 26, 2018). Asset purchase of Family Tree Home Care, Shrewsbury, MA, for $2.1M: $0.45M cash, $1.35M bank demand loan, $0.30M note; LOI announced January 9, 2018.

Reviewed November 2026

Questions owners ask

Straight answers, before you commit to anything.

Can a buyer lower the price after the LOI is signed?+

Yes. Price is almost always non-binding, so a buyer can propose a lower number after diligence, which is called a re-trade. Tying the price to a stated EBITDA figure and ending exclusivity if the price drops make that harder.

Can I back out after signing a letter of intent?+

Usually yes, because the deal terms are non-binding. You stay bound by exclusivity, confidentiality, and any expense reimbursement or break fee you agreed to until they expire.

What if another buyer calls me during exclusivity?+

You can't negotiate with them or send them information until exclusivity ends. Many no-shop clauses also require you to tell your buyer about the approach, sometimes including the caller's name and terms, so read that wording before you sign.

How long after the LOI does a home care sale close?+

Diligence, licensing work, and documents commonly take 60 to 120 days. A deal that needs a new Medicare enrollment, a state license issued to the buyer, or a certificate of need review can take longer.

Should I tell my staff when I sign an LOI?+

Usually not. The LOI carries a confidentiality obligation and the deal can still fall apart. Most owners bring in key managers only when diligence needs them and tell caregivers at or just before closing.

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