Three dental owners, one sponsor, and a deal that nearly split apart

The situation

The term sheet had already been signed when the disagreement surfaced, three weeks before the scheduled closing on a transaction valued in the sixty-million-dollar range. Andrei, a dentist who had built a group of dental practices across the Dunnville area over fifteen years, was meant to be rolling his equity into a private equity sponsor's new regional platform alongside two other practice owners. The plan was straightforward on paper: the sponsor would acquire majority control, each founder would exchange part of their ownership for cash and part for equity in the new combined entity, and the group would keep operating under existing management while the sponsor added scale through further acquisitions.

Andrei brought us in after a call with his co-investors went badly. Bogdan, who owned a multi-unit franchise of dental clinics under a separate banner and was contributing the largest number of locations to the platform, wanted a bigger say in how the combined company would be governed after closing. Kiran, a smaller practice owner who was rolling in a single high-performing location, wanted assurances that the debt the sponsor planned to load onto the new entity would not put his contributed practice at risk if the platform underperformed.

Andrei's own priority was simpler but no less firm: he wanted to remain the clinical lead across the practices he had built and did not want that authority diluted by a governance structure written to favour whoever had contributed the most locations. He had spent fifteen years building a reputation with patients and staff on the strength of decisions he made himself, and the idea of a board vote determining how his own operating rooms were run sat badly with him even before he understood exactly how much control he might be trading away.

The original term sheet had treated the three owners as a single aligned selling group, represented by one set of counsel and one voting block. That assumption had held during early negotiations with the sponsor, when everyone's interest was simply getting the deal signed. It stopped holding once the parties had to agree on the details that actually mattered after closing, and by the time Andrei called us, the three founders were no longer speaking to each other directly, routing every disagreement through the sponsor's deal team instead, which was slowing everything down and giving the sponsor more visibility into the founders' internal split than any of them wanted.

The sponsor's financing was tied to a lender commitment with its own expiry date, which meant the founders' disagreement was not just a relationship problem. It was now a real threat to whether the transaction happened at all.

The complication

What had looked like one deal was really three deals wearing a single term sheet. Each owner was contributing a different mix of cash, rolled equity and debt exposure, and the leveraged recapitalization structure the sponsor had proposed meant the new entity would carry a substantial loan secured against the combined practices. If the platform underperformed, the practices contributed by all three owners would be exposed to that debt regardless of whose practice was actually struggling.

Kiran's practice was the most profitable per location of the three, and he had the least to gain from subsidizing a platform-wide loan that partly reflected the purchase price of practices he had no hand in choosing. He had built his single location carefully over a shorter period than either of the other two founders and saw no reason his years of low overhead and disciplined growth should now be pledged against a loan sized for a platform three times the scale he had ever personally operated. Bogdan's franchise locations carried more variable margins, month to month, than either Andrei's or Kiran's practices, and he wanted governance rights proportionate to the scale he was contributing, which Andrei read as an attempt to control clinical decisions across practices Bogdan had never operated and did not, in Andrei's view, understand well enough to govern.

The sponsor, for its part, wanted the deal to close on the original terms and was not eager to reopen a structure it had already modelled and financed. Its lenders had underwritten the debt package against the combined platform as a single credit, treating all three practices as one pool of collateral and cash flow, and changing the allocation of that debt between the three owners' contributed practices meant going back to the lender for revised terms, which risked delaying closing past the date the financing commitment expired. A lapsed commitment would have meant re-underwriting the whole loan from scratch, potentially at worse terms given how debt markets had moved since the original commitment was issued months earlier.

Every proposed fix created a new problem. Giving Kiran protection from the platform-wide debt meant either the sponsor absorbing more risk itself or Bogdan and Andrei absorbing a larger share, neither of which either founder wanted to accept. Giving Bogdan proportionate governance meant Andrei's clinical authority would be subject to a board where Bogdan held more votes, which Andrei had told the sponsor from the first meeting he would not agree to under any circumstances. The sponsor, watching three founders it needed to stay motivated after closing threaten to walk away from each other, had its own reason to want a fix rather than simply forcing the original terms through.

What we did

1. Separated the single selling group into three distinct negotiating positions. The original structure treated the three owners as aligned, which had masked real differences in what each needed from the deal once closing terms moved from the abstract to the concrete. We advised Andrei to insist the term sheet be reopened on the specific points of divergence rather than renegotiated wholesale, which kept the sponsor engaged in fixing the problem instead of walking away from a deal it had already invested months in structuring.
2. Modelled the debt allocation practice by practice. Working with the transaction's financial advisors, we built out what each owner's contributed practice would actually be exposed to under several different debt-sharing structures, running the numbers under both a stable-performance scenario and a downside scenario. That modelling let Kiran see concretely how much risk a ring-fenced arrangement would remove compared to the pooled structure the sponsor had first proposed, rather than relying on a general sense that pooling felt unfair.
3. Proposed a tiered protection for Kiran's contribution. Rather than exempting his practice from the debt entirely, which the sponsor's lender would not accept without reopening the entire credit facility, we negotiated a structure where Kiran's equity stake carried a priority return before the platform-wide debt service was allocated against his practice's cash flow. That gave him meaningful downside protection in a weak year without unwinding the lender's underlying security package, which was the one thing the sponsor's financing simply could not accommodate.
4. Drafted a governance carve-out for clinical authority. We separated business governance, which would sit with a board weighted toward contribution size as Bogdan wanted, from clinical decision-making at the practices Andrei had founded, which stayed with Andrei under a defined charter the board could not override without cause. Defining what counted as a clinical decision versus a business decision took several drafting rounds, since the two categories overlapped in places like staffing and equipment purchases.
5. Renegotiated with the sponsor as a coordinated but not identical group. Each owner kept separate counsel input on the points specific to them while presenting a single position to the sponsor on timing, which avoided the appearance of the deal unravelling in front of the sponsor's investment committee and kept the sponsor's lender comfortable that closing would still happen inside the financing window.
6. Rebuilt the closing documents against the revised allocation. The purchase agreement, shareholders agreement and the debt subordination terms all had to be revised to reflect the tiered structure and the governance carve-out, which took real drafting time against a closing deadline that had already slipped once and could not slip much further without triggering a fresh lender review. Every cross-reference between the three documents had to be checked again, since a mismatch would have undone the protection each side thought it had negotiated.
7. Held a final alignment call before signing. With the terms settled on paper, we walked all three owners through exactly what they were agreeing to and what they were giving up in plain language, line by line, so nobody signed believing they had won more than they actually had, which mattered as much for the working relationship the three of them would need after closing as for the contract itself.

The outcome

The recapitalization closed roughly six weeks later than originally scheduled, inside the sponsor's financing window but only by a matter of days. Kiran got the priority return protection he wanted, though not the full exemption from platform debt he had first asked for; his practice remained part of the combined credit, just with a cushion ahead of it that would pay out before debt service was drawn against his cash flow in a downside year. Bogdan got proportionate governance over business decisions across the platform, which was the scale-weighted structure he had pushed for from the start, giving him more formal influence over budgeting and expansion decisions than Andrei was entirely comfortable with.

Andrei kept clinical authority over the practices he had built, carved out from the board's general powers under a charter that took several drafting rounds to get right, but he gave up the simpler, faster close he had originally expected and accepted a governance structure where he no longer controlled the platform's business direction the way he had controlled his own practices for fifteen years. That was, by his own account afterward, the hardest part of the deal to accept, harder in some ways than any number on the page.

None of the three owners got the deal they would have designed alone. The sponsor absorbed some additional legal cost from the delay and a marginally more complex capital structure than it had planned to finance, going back to its lender once to confirm the tiered arrangement was acceptable, but it kept the platform it wanted and the practices it had targeted without losing any of the three founders from the deal entirely.

A year after closing, the arrangement was still functioning largely as negotiated, with the clinical carve-out tested once, when the board raised a staffing question Andrei considered clinical and Bogdan considered operational, and upheld under its own terms rather than through further dispute. The three founders were speaking to each other directly again by then, which Andrei counted as its own kind of result.

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