What is a non-compete in a healthcare practice sale?
A non-compete in a healthcare practice sale restricts the selling physician from opening or joining a competing practice within a defined radius and time period after closing. Courts enforce sale-based covenants more readily than employment ones; for dental practice sales, Jaffe Law says they often run 15 to 20 miles and 3 to 5 years, and state law decides what holds.
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Definition
A non-compete (non-competition covenant) is a contractual restriction, negotiated as part of a practice sale, that limits where and when a selling physician can provide services after the transaction closes.
The detail
Non-competes tied to practice sales are treated differently from employment non-competes in most states. Courts generally enforce sale-based non-competes more readily, because the seller negotiated at arm's length and is paid for the goodwill the covenant protects. Terms vary with the market. For dental practice sales, Jaffe Law says sale non-competes often run 15 to 20 miles and 3 to 5 years, broader than what would hold up in an employment contract, and a 2020 Dental Economics column by a transitions attorney put average radii at about eight miles, one to five miles in urban areas and up to 20 miles in rural ones. Scope is usually limited to the same specialty. Enforceability still depends on state law, and the sale exception matters most in the states that ban most non-competes: California, Minnesota, North Dakota and Oklahoma void them generally but let the seller of a business agree not to compete (Cal. Bus. & Prof. Code §16601, Minn. Stat. §181.988, N.D.C.C. §9-08-06, Okla. Stat. tit. 15 §218), and Oklahoma limits the area to the county where the business operates and the counties next to it. Several states have active legislation restricting physician non-competes further. The FTC issued a nationwide non-compete ban in April 2024, but a federal district court blocked it on August 20, 2024, the FTC moved to dismiss its appeal on September 5, 2025, and the rule is not in effect. It would not have reached practice sales anyway: the rule exempted non-competes signed as part of a bona fide sale of a business. Sellers who plan to move to a non-compete-restrictive state or continue practicing part-time should negotiate carve-outs in the sale documents.
The FTC's non-compete rule is not in effect: a federal district court stopped enforcement on August 20, 2024, and the FTC moved to dismiss its appeal on September 5, 2025. The rule also exempted non-competes signed in a bona fide sale of a business.
Source: FTC: Noncompete Rule
California voids contracts that restrain anyone from a lawful profession, but a person who sells the goodwill of a business may agree not to carry on a similar business within the area where it operated.
Minnesota's non-compete ban keeps a covenant valid when it is agreed during the sale of a business, for a reasonable area and length of time.
Source: Minnesota Statutes §181.988
Dental practice sale non-competes often run 15 to 20 miles and 3 to 5 years, broader than what courts would enforce in an employment contract.
Source: Jaffe Law: Restrictive Covenants in Dental Contracts (Dec 2025)
What this means for clinic owners
From Sorso
The non-compete can still matter years after closing, when you want to practice again. Negotiate the geography and carve-outs before signing, not after, because courts will generally enforce what you agreed to in a sale unless a state law specifically says otherwise.
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Private equity firms value a medical practice as a multiple of its trailing-twelve-month adjusted EBITDA, and the multiple rises with scale. Published ladders run from 2.5–4x for a single owner-operated physical therapy clinic (Breakwater M&A) to 10x–20x for large primary care platforms (Scope Research), and payer mix, growth and owner dependence move a practice within its band.
How much will a DSO pay for my dental practice?
DSOs typically pay 5x to 8x EBITDA for an add-on practice of one to three locations and 9x to 11x for a platform-size group, according to FOCUS Investment Banking; Jaffe Law, a dental M&A law firm, puts typical DSO offers for individual practices lower, at 3x to 5x EBITDA or 80% to 100%+ of collections. Only 60% to 80% of the price usually arrives as cash at closing, per Jaffe Law; the rest is rolled equity and an earnout, which Jaffe puts at 20% to 40% and 10% to 30% of the price. Those are separate ranges, so a deal that uses both sits in the lower half of each.
Should I sell my practice to private equity?
Selling to private equity makes sense if you want partial liquidity, want to grow with capital and infrastructure, and are willing to operate as a partner rather than sole owner; it is wrong if you want full retirement or full operational autonomy.
How do I evaluate a PE offer?
Evaluate a PE offer on six dimensions: enterprise value multiple, cash at close percentage, rollover equity terms, post-close compensation structure, earnout conditions, and platform exit timing assumptions.
What is an LOI in healthcare M&A?
A letter of intent (LOI) in healthcare M&A is a mostly non-binding agreement that sets the proposed purchase price, structure, exclusivity period, and diligence timeline before a buyer commits the resources to close a deal. The exclusivity and confidentiality clauses are the parts that usually bind.
Sources
- FTC: Noncompete Rule
- FTC: Files to Accede to Vacatur of Non-Compete Clause Rule (Sep 2025)
- California Business and Professions Code §16601
- Minnesota Statutes §181.988
- North Dakota Century Code §9-08-06 (PDF)
- Oklahoma Statutes Title 15, §§217 to 219A (RTF)
- Jaffe Law: Restrictive Covenants in Dental Contracts (Dec 2025)
- Dental Economics: What are reasonable restrictive covenants? (Feb 2020)
Founder of Sorso and a CFA charterholder. Before Sorso, Stan spent 19 years in corporate finance at institutions including UniCredit and Société Générale — managing a $450M loan portfolio and making senior partner at a major mezzanine lender by 29 — then built a fractional CFO firm exclusively for outpatient healthcare clinics.
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