What Buyers’ Accountants Look For in Dental Practice Diligence in 2026

“They’re sending four people.”

That was the entire message. He had signed a letter of intent on a Tuesday.

By Friday he had a request list running to 71 numbered items and a calendar invite from an accounting firm he had never heard of.

What he wanted to know was what they were looking for.

Underneath that sat the question he did not quite ask, and it is the one almost every owner is really asking at that moment. What are they going to find that I don’t already know about?

That fear is the wrong frame, and carrying it into diligence costs owners money. Nobody is auditing your honesty.

Key takeaways

• Diligence is the buyer pricing their uncertainty, not testing your character. Every question you cannot answer with a document becomes a risk in their model, and risk becomes a discount.
• The request list is predictable. Financial, operational, legal and clinical or compliance records, in roughly that order. None of it should be a surprise, and all of it can be assembled before you sign anything.
• A quality of earnings review is where reported profit gets tested. It rebuilds your earnings from source data, restates the cost of replacing your own clinical production, and strikes out anything you cannot evidence.
• Dental deals break in the same handful of places. Undocumented add-backs, a lease that will not assign, associate agreements without enforceable restrictions, credentialing that does not travel, attrition hiding inside flat collections, and one provider carrying the schedule.
• The real damage from a finding is what it implies. One thing that was not as described makes a buyer re-price everything they have not checked yet. Preparing the answers in advance is the only reliable defence.

What is dental practice due diligence? Due diligence is the investigation a buyer runs after a letter of intent is signed, to verify that the practice performs as represented.

It covers financial records, operations, legal documents and clinical compliance, and usually includes a quality of earnings review that rebuilds your earnings from source data.

A note before we go further. What follows is general information about how these processes work, not legal or accounting advice.

Your entity structure, your state, and the specific request list in front of you all change the answers. Have a dental transactions attorney and a CPA who has done this work review your own situation.

What diligence actually is, and the mindset that survives it

A DSO is a dental support organization, the management company that owns the non-clinical side of a practice and handles everything outside the operatory, while a licensed dentist keeps ownership of the clinical entity.

When one of them buys your practice, they are not buying chairs and a patient list. They are buying an earnings stream that has to keep running after you stop being the reason it runs.

Mandelbaum Barrett describes diligence as the buyer’s careful assessment of the benefits and liabilities of the acquisition, running from the letter of intent through to closing.

Here is the reframe that makes the whole thing survivable.

Diligence is not a search for wrongdoing. It is a pricing exercise.

The buyer is converting everything they do not yet know into a number, and unknowns always price against you.

An answer you can evidence removes a question. A question you cannot answer stays open, and open questions get reserved against.

So the owner who shows up with three years of clean statements, a signed lease with an assignment clause, and an invoice behind every add-back is not being defensive. They are systematically removing the buyer’s reasons to move the price.

I want to say plainly that none of this makes buyers adversaries. A group spending several million dollars on a practice they have never operated would be reckless not to check.

Cranfill Sumner’s walkthrough describes financial and legal diligence as significantly more exhaustive in a DSO sale than in a doctor-to-doctor one. That is exactly what you should expect.

The buyers have also got choosier. Becker’s reporting on how dental M&A is evolving in 2026 describes groups walking away over provider risk and clinical continuity — thin staffing, over-reliance on a single producer — rather than over price.

An owner pushed back on all of this once, and the objection is worth repeating because it is the honest version of what most people are thinking.

“I’ve run this practice for 22 years without anyone auditing me. Why should I let strangers pick through it now?”

Fair question. The answer is that they will pick through it either way, because no buyer wires seven figures on trust.

Your only real choice is whether they find things you already knew about, or things you did not.

The first version costs you nothing. The second version costs you the multiple.

What documents will a dental buyer ask for in diligence?

What does a dental practice due diligence request list include? Expect four groups. Financial records: 3 years of P&Ls, tax returns, production and collections by provider, aging schedules.

Operational data: schedule utilisation, recall, payer mix, fee schedules, patient counts. Legal: entity records, the lease, employment and associate agreements.

Clinical and compliance: credentialing, OSHA, HIPAA, radiography certification.

The list looks intimidating because of its length, not its difficulty. Almost every item already exists somewhere in your office.

The ADA’s own guidance on selling a practice tells owners to assemble much of this before going to market — practice accounts, federal returns, staff contracts, an equipment inventory with serial numbers, active patient counts, production data, new-patient sources and collection rates.

Here is what gets asked for, and more usefully, what each item is actually testing.

Category	What they ask for	What they are really testing
Financial	3 years of profit and loss statements, monthly not annual	Whether earnings are steady or one good year carrying two ordinary ones
Financial	3 years of federal and state tax returns	Whether the returns and the internal statements tell the same story
Financial	Production and collections by provider, by month	How much of the practice is you, and how transferable the rest is
Financial	Accounts receivable aging and write-off history	Whether reported collections are real and how aggressively you adjust
Financial	The add-back schedule, with supporting invoices	Whether each adjustment survives contact with a document
Financial	Payroll register and staff compensation detail	Family on payroll, above-market pay, and what replacing you costs
Operational	Schedule utilisation and open-chair time	Whether there is capacity to grow, or the practice is already full
Operational	Recall and reappointment reports	Whether the patient base renews itself without you chasing it
Operational	Active patient count and 2 to 3 years of attrition	Whether the base is growing, holding, or quietly shrinking
Operational	Payer mix and every contracted fee schedule	How much of your revenue sits at someone else’s negotiated rate
Operational	Hygiene production as a share of collections	Recurring, transferable revenue — the part that does not leave with you
Legal	Entity documents, minutes, ownership records	Whether the thing being sold is cleanly owned and cleanly transferable
Legal	The lease, amendments, and any landlord correspondence	Remaining term, assignment rights, and whether the landlord gets a vote
Legal	Employment and associate agreements	Whether producers are contracted, and whether their restrictions bind
Legal	Vendor, equipment and software contracts	Assignability, termination fees, and what breaks on a change of control
Legal	Litigation, claims and lien searches	Unpaid taxes, judgments and anything a search will surface anyway
Clinical / compliance	Provider licences, DEA registrations, credentialing files	Whether every provider can legally keep working after closing
Clinical / compliance	Payer enrolment records and effective dates	How much revenue is exposed while enrolment moves to a new owner
Clinical / compliance	OSHA and HIPAA documentation, including risk analysis	Whether compliance is a system or a folder someone made last week
Clinical / compliance	Radiography equipment registration and certification	State-level obligations that follow the equipment, not the owner
Clinical / compliance	Malpractice history and current coverage, including tail	Claim exposure and who pays for the run-off policy

Mandelbaum Barrett’s list of pitfalls in dental transactions puts the same items in a shorter sentence: assets and liabilities, a premises inspection, financials, receivables, employment agreements, leases and contracts, insurance, and a lien search.

One practical note. Buyers usually want this in a data room with a clear index, not as 71 loose email attachments.

The owner who hands over a structured, indexed set signals something before anyone reads a line of it. The owner who sends things in dribs and drabs over six weeks signals something too.

What is a quality of earnings review, and why does it exist?

What is a quality of earnings review in a dental practice sale? A quality of earnings review, or QofE, is the deep financial examination the buyer’s accountants run to test whether reported profit is accurate and recurring.

It rebuilds earnings from source data rather than accepting your statements, and restates anything that will not repeat under new ownership.

Mandelbaum Barrett describes the QofE as designed to uncover the exact earnings value of the practice, and notes plainly that sellers often find the process overwhelming.

It exists for a simple reason. Your profit and loss statement was built for tax purposes, by an accountant optimising for the lowest legal tax bill.

The buyer needs a number built for the opposite purpose.

Two things happen to your numbers in a QofE, and dental owners are usually only braced for one of them.

Personal and one-off expenses come back out. The vehicle. The family member on payroll above what the role pays.

The continuing-education trip that was mostly a holiday. The one-time equipment failure.

These are add-backs, and they raise the number — if you can evidence them. What survives that test and what does not is a longer subject, and we walk it through in our guide to dental practice EBITDA add-backs.

Your own clinical production gets re-priced. This is the subtraction owners miss, and in a dental practice it is usually the largest single line in the whole exercise.

Adjusted EBITDA is what the practice earns in pure operating profit after paying a market-rate dentist to do the work you currently do yourself.

Whatever you take out of the practice is irrelevant to that calculation. What matters is what it would cost to hire someone to produce what you produce.

Work an example. Say a seller’s package credits $200,000 as the cost of replacing the owner’s own clinical work.

The buyer’s accountants look at the production report, price a replacement dentist at $330,000, and restate the line.

Adjusted EBITDA falls by $130,000. On a practice being priced at 8 times, that single restatement moves the price by more than $1 million.

Nothing dishonest happened. Two parties simply valued the same chair differently, and only one of them had a document behind their number.

Denominators cause a surprising share of these arguments. The ADA’s own explainer on dentist compensation separates total production, adjusted production and collections — three different numbers that owners and buyers routinely use interchangeably.

If your memo says “production” and their model says “collections,” you will spend a week discovering you were never talking about the same practice.

Where dental deals actually break

Diligence rarely kills a deal outright. It re-prices them, and it does so in a short list of predictable places.

Undocumented add-backs. The most common finding by a distance. An add-back you can describe is worth nothing; an add-back with an invoice attached is worth its face value multiplied by the multiple.

There is no partial credit.

A lease that cannot be assigned, or is nearly over. Mandelbaum Barrett makes the point that a tremendous amount of goodwill attaches to the location, and that landlord consent is normally required for an assignment.

Two things go wrong here. A short remaining term means the buyer is underwriting a renegotiation they do not control.

And a landlord who learns about the sale from the buyer’s lawyer sometimes decides this is a good moment to reset the rent.

Associate agreements without enforceable restrictions. If a producing associate can leave on 30 days’ notice and open two miles away with your patients, the buyer is not buying that production.

Nixon Peabody notes that restrictive covenants continue to warrant careful attention, because enforceability varies substantially between states. An agreement that binds in one state may be unenforceable across a border.

Credentialing that does not transfer cleanly. This one is specific to healthcare and it catches dental owners repeatedly.

Credentialing attaches to the individual provider and the tax identification number, not to the practice as an abstraction. Change the owning entity and payers can treat it as a new enrolment.

The ADA has been pushing on the delay this creates. Its Council on Dental Benefit Programs approved a provisional credentialing toolkit in May 2026.

It urges payers to let qualified dentists treat and bill while final review completes, capped at 60 days, with reviews targeted inside a week of a complete application.

That the ADA had to publish it tells you how the current timelines feel. A buyer modelling several months of degraded in-network billing on a PPO-heavy practice will put that cost somewhere, and the somewhere is your price.

Patient attrition hiding inside flat collections. This is the one I would look at first if I were you.

Collections can hold steady for two years while the active patient count falls, because fees rose or the mix shifted toward higher-value treatment. The top line looks fine.

The base underneath it is eroding.

A buyer’s analyst finds this in an afternoon, because attrition is the single best predictor of what happens after the selling dentist leaves.

Single-provider concentration. Becker’s reporting describes groups walking away over exactly this — over-reliance on a single producer and uncertainty about clinical continuity.

DrBicuspid’s review of what is changing in practice sales puts provider concentration at the top of the list of reasons buyers restructured offers or walked in 2026, ahead of softening revenue and payer-mix exposure.

Payer mix nobody stress-tested. Medicaid concentration is being evaluated state by state now, because the state-level picture genuinely differs. ADA Health Policy Institute research puts Medicaid fee-for-service dental reimbursement in most states below 50% of dentist charges and below 60% of private insurance rates.

A practice with heavy Medicaid exposure in a state cutting rates is a different asset from the same practice in a state expanding them, and buyers price that difference.

The regulatory layer, in some states. Underneath every one of these transactions sits the corporate practice of dentistry — the state laws restricting who can own or control a dental practice, catalogued in the House Oversight Committee’s 50-state survey.

Those laws are the reason the management services organization structure exists at all. Benesch’s dental industry newsletter tracks how quickly the compliance picture around these arrangements has been moving.

If you are selling a group of any size, the structuring question belongs in the timeline early, not as a discovery in month three.

How a finding turns into a price reduction

Here is the mechanic that owners underestimate, and it has almost nothing to do with the size of the finding.

A buyer discovers that $120,000 of claimed add-backs cannot be evidenced. The arithmetic consequence is straightforward and it is multiplied, not absolute.

But that is not where the money goes.

The money goes into everything the buyer has not checked yet. One item that was not as described re-prices the credibility of every item still outstanding, and a buyer who has just been surprised starts reserving against surprises.

That is the re-trade. Its mechanics — why exclusivity leaves you with no answer to it, and why timing matters more than size — are the subject of our piece on how long it takes to sell a dental practice.

What diligence finds	Why it lands harder than it looks
Add-backs without documents	The disallowed earnings get multiplied, and the rest of the schedule now looks optimistic too
A short lease with no assignment clause	The buyer is underwriting a negotiation with a third party who now knows a sale is happening
An associate with no enforceable restriction	The production attributed to that provider stops being an asset the buyer can rely on
Credentialing that will not travel	Months of degraded in-network billing get modelled as a real, dated cost
Falling active patients under flat collections	The forward projection gets rebuilt, and forward projections are what the multiple is applied to
One provider producing most of the revenue	Concentration risk, which buyers have shown they will walk from rather than price

Notice that none of these require anyone to behave badly. Every one is a rational response to information that genuinely changed.

Which is precisely why the answer is not tougher negotiation. It is arriving with nothing left to discover.

The pre-diligence self-audit

You can run most of what the buyer’s accountants will run, months before anyone signs anything. Not to grade yourself.

To find the arguments while you still have every option open.

This overlaps with, but is narrower than, the full readiness work in our guide to preparing a dental practice for sale. What follows is specifically the diligence rehearsal.

Rebuild 3 years of monthly financials, then read them as a stranger would. Where does a month look odd? Have the answer written down before someone else asks.

Put a document behind every add-back. Invoice, payroll record, job description, market comparison. If you cannot produce the document today, remove the add-back from your own expectations today.

Price your own replacement honestly. Pull your production, then price what a dentist would cost to produce it. If that number is uncomfortable, better to sit with it now than to hear it from a stranger in week 7.

Read your lease. Remaining term, renewal options, assignment language, consent standard. If it has under 5 years left or no assignment clause, that is a project, and projects take months.

Pull every producing provider’s agreement. Is it signed? Is it current?

Does it restrict them, and would that restriction hold in your state?

Chart active patients by year, not collections by year. If the two lines are diverging, you want to know why before a buyer’s analyst tells you.

Check the compliance folder is a system. OSHA records, HIPAA risk analysis, radiography certification, licences and credentialing files, current and dated.

Establish who keeps the receivables. Mandelbaum Barrett flags accounts receivable as a recurring pitfall — decide early who collects what after closing, and write it down.

Settle the tax allocation approach early. How the price is split across asset classes changes what you keep, and both sides must report it consistently on IRS Form 8594. Agreeing the approach costs nothing in month one and real money in the final week.

When we prepare a practice for sale, part of the work is a thorough pre-sale financial review on our side of the table, built around the same scrutiny the buyers’ accountants will apply, months before any buyer sees a number.

Every add-back gets evidenced. Every lease term, agreement and corporate record gets checked.

Anything that would not survive a deep look gets fixed while you still hold every card.

The point is narrow. An owner who has already been through that review meets diligence with nothing new to find, and no new information means no reason to revisit the price.

Why competition changes what diligence can do

Everything above assumes one condition, and it is worth making explicit.

With a single buyer, a finding is leverage. They tell you what it means for the price and you have no alternative response, because there is nobody else in the room.

With several qualified buyers who competed to get there, the same finding is a conversation. You can absorb it, argue it, or turn to the next bidder — and everyone in the room knows that.

The buyer pool supports it. The Association of Dental Support Organizations counts 80-plus DSO member companies, and Becker’s reported that 69% of DSOs said their sponsors expected a moderate or high increase in acquisition activity in 2026.

PitchBook’s healthcare services coverage found private equity managers participating in 132 dental deals in a single year, more than any other healthcare services subsector.

Meanwhile the supply of independent owners keeps shrinking. ADA Health Policy Institute data puts private practice ownership at 72.5% of US dentists in 2023, down from 84.7% in 2005.

That scarcity sits on your side of the table until you hand it away by talking to one buyer at a time.

This is the thinking behind the Elite Selling System. Every buyer who gets to bid is selected and vetted first, the way a doorman working a velvet rope decides who comes in before anyone reaches the door.

The bidding then runs privately inside that short list.

A buyer who won a contested process behaves differently in diligence. They already stretched, they know what they had to beat, and testing whether the number can slip in week 7 risks a practice they worked to win.

Diligence still happens. It just stops being the moment your price gets decided.

What to do next

If a request list is already in your inbox, the useful move is not to answer it faster. It is to know what your own numbers say before their accountants tell you.

If a letter of intent is on the table but unsigned, read the binding provisions first — our guide to what you are actually signing in a DSO letter of intent covers which parts of that document bind you and which do not.

And if nothing has been signed at all, you are in the strongest position you will ever occupy. Most owners spend it waiting for the phone to ring.

We will tell you where you stand, free and in confidence, including the answer that your practice needs 18 months of work before it goes anywhere near a buyer, when that is the honest answer.

It starts with a free, confidential practice value estimate.

Our fee varies depending on the value of the practice and is entirely success-based. If we do not get you a result, we do not get paid.

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Frequently asked questions

How long does dental practice due diligence take?

Commonly 60 to 120 days from signing the letter of intent, running in parallel with the drafting of definitive agreements. Practices with clean, indexed records finish at the short end.

Practices whose accountant has to reconstruct 3 years of statements mid-process add weeks or months.

What is a quality of earnings review and who pays for it?

A QofE is the deep financial examination the buyer’s accountants run to test whether reported profit is accurate, recurring and defensible. The buyer commissions and pays for it.

It rebuilds your earnings from source data rather than accepting your statements at face value.

What documents will a dental buyer ask for?

Three years of monthly financials and tax returns, production and collections by provider, aging and write-off reports, payroll detail, schedule and recall data, active patient counts, payer mix and fee schedules, entity records, the lease, employment and associate agreements, plus licensing, credentialing, OSHA, HIPAA and radiography compliance records.

What is the most common problem found in dental practice diligence?

Add-backs that cannot be evidenced. An adjustment you can explain but not document gets disallowed, and disallowed earnings reduce the price by a multiple of the amount.

Lease problems and single-provider concentration follow close behind.

Can a buyer lower the price after due diligence?

Yes. Price in a letter of intent is typically non-binding, so a finding during diligence can be used to revisit it.

The defence is preparation rather than negotiation, because a buyer who finds nothing new has no basis to reopen the number.

Does credentialing transfer when I sell my dental practice?

Not automatically. Credentialing attaches to the individual provider and the tax identification number, so a change of owning entity can require fresh enrolment with each payer.

The ADA approved a provisional credentialing toolkit in May 2026 urging payers to shorten the gap, which tells you the gap has been real.

Should I run my own audit before a buyer’s accountants arrive?

You should have your financials independently reviewed before going to market, built around the scrutiny a buyer will apply. That is preparation work an advisor runs on your side of the table, not something you commission from the buyer’s playbook after you have already signed.

Do I need a lawyer and an accountant for due diligence?

Yes, and both should have done dental transactions before. This article is general information, not legal or accounting advice.

State rules on ownership, restrictive covenants and the corporate practice of dentistry vary enough that generic advisers miss things that matter.

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Sources

The dental transaction and diligence process

1. Mandelbaum Barrett PC. “The Four-Phase DSO Transaction Process: What to Expect When Selling a Dental Practice.” mblawfirm.com
2. Mandelbaum Barrett PC. “Pitfalls to Avoid When Buying or Selling a Dental Practice.” mblawfirm.com
3. Cranfill Sumner LLP. “Selling Your Dental Practice to a DSO: What to Expect Before, During, and After the Deal.” cshlaw.com
4. Nixon Peabody LLP. “Five Issues Dentists and DSOs Should Address Before Signing a Transaction.” July 2026. nixonpeabody.com
5. Benesch. “Dental/DSO Industry Newsletter, May/June 2026.” beneschlaw.com

ADA guidance on preparing a practice for sale

6. American Dental Association. “What to Do When Selling a Practice.” ada.org
7. American Dental Association. “Dentist Compensation: What Every Dental Associate Should Know.” ada.org

Credentialing, payer mix and compliance

8. ADA News. “New ADA Toolkit Aims to Reduce Credentialing Delays for Dentists.” July 2026. adanews.ada.org
9. American Dental Association. “ADA Credentialing Service.” ada.org
10. ADA Health Policy Institute. “Dental Care in Medicaid Programs.” ada.org
11. US House Committee on Oversight. “Survey of State Laws Governing the Corporate Practice of Dentistry.” oversight.house.gov

Tax

12. Internal Revenue Service. “Instructions for Form 8594, Asset Acquisition Statement.” irs.gov

Buyer behaviour and the 2026 market

13. DrBicuspid. “Dental Practice Values Hold, but These Shifts Are Changing Who Sells and for How Much.” drbicuspid.com
14. Becker’s Dental Review. “How Dental M&A Is Evolving in 2026.” beckersdental.com
15. Becker’s Dental Review. “69% of DSOs Plan to Boost Acquisitions in 2026: Report.” beckersdental.com
16. PitchBook. “Dental and Vet Deals Drive Healthcare Services M&A.” pitchbook.com
17. Association of Dental Support Organizations. “About ADSO.” theadso.org
18. ADA Health Policy Institute. “Practice Ownership Trends in Dentistry: A New Look at Old Data.” ada.org