Key Takeaways
- Dual agency in dental practice sales can weaken valuation because the broker’s incentives are split between seller and buyer.
- Major risks include reduced valuation independence, a smaller buyer pool, confidentiality exposure, information gaps, fee misalignment, and three-way conflicts in DSO deals with real estate.
- Broker compensation tied mainly to closing can encourage fast, low-friction deals instead of competitive auctions that support higher multiples.
- Sellers can protect themselves by declining dual-agency clauses, negotiating them out, or hiring a sell-side-only advisor who maintains independent advocacy.
- McLerran & Associates provides sell-side-only representation with CPA-led valuations and structured buyer competition to help protect seller value.
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What Dual Agency Means In A Dental Practice Sale
Dual agency in a dental practice sale occurs when a single broker or brokerage firm represents both the selling dentist and the buyer in the same transaction and collects fees from both sides. This structure differs from real-estate dual agency. A dental practice sale is a business-brokerage transaction. The subject matter is a going concern with EBITDA, goodwill, patient relationships, and lease obligations, not a parcel of real property.
That distinction matters legally. Florida Statute §475.278 governs real-estate brokerage relationship disclosures. It prohibits disclosed and nondisclosed dual agency in real-estate transactions. Whether it applies to a dental practice sale depends on whether the specific transaction triggers a licensed real-estate activity. Florida’s real estate broker definition expressly covers business enterprises and business opportunities, which makes it one of the broader states on this question. A seller who assumes that Florida’s dual-agency rules automatically protect them in a dental practice sale may be mistaken. The analysis turns on the specific transaction structure and the governing statute.
The American Dental Association recommends assembling a qualified advisory team for a dental practice sale. That team can include an attorney experienced in dental practice transactions, a CPA, and other independent specialists. This recommendation exists because the interests of a seller, a buyer, and a broker whose fee depends on closing can diverge.
For a broader look at how to evaluate broker agreements before signing, see Dental Practice Broker Reviews: How To Judge Before You Sign. Once you understand what dual agency is, the next step is to see how it can affect your proceeds.
Key Risks Of Dual Agency In A Dental Practice Sale
The six risks below connect directly to how money moves in a dental practice transaction. They focus on valuation, competition, and control of information.
- Valuation independence is compromised. The same broker who sets the asking price also represents the buyer who benefits from a lower price. When the buyer’s quality-of-earnings (QoE) team, meaning the accountants who scrutinize the seller’s financials during due diligence, challenges EBITDA add-backs, the dual agent has limited structural incentive to defend the seller’s number. Normalization disputes are a common source of post-LOI price re-trading, and a broker paid from both sides is poorly positioned to fight them.
- The buyer pool shrinks. Discerning, well-qualified buyers, especially institutional DSO (Dental Service Organization) buyers with experienced M&A teams, often avoid processes where the broker’s loyalties are split. A smaller, less competitive buyer pool reduces the auction tension that can push prices toward the upper end of the valuation range. A controlled sale process improves price discovery because it reveals which buyers see strategic value beyond the standalone financials. That process depends on credible competition.
- Confidentiality of patient metrics and financial vulnerabilities weakens. The broker now holds the seller’s sensitive practice data: production by provider, payer mix, hygiene recare rates, and accounts receivable aging. At the same time, the broker represents the buyer who can use that information in negotiation. Sellers should ask how a broker will protect their identity, financial records, employee information, and patient-related data before any disclosure is made.
- Information asymmetry in valuation increases. The seller usually sells once in a career. The broker and the institutional buyer negotiate every week. A DSO’s opening offer is the output of an underwriting model designed to generate returns for the sponsor’s limited partners. That model relies on assumptions about provider retention, payer mix durability, and operational leverage. The buyer controls those assumptions, and the seller typically cannot see them. A dual agent who understands both sides of that model has no obligation to share what they know with the seller.
- Fee incentives can pull against maximum value. The broker’s compensation usually depends on closing, not on maximizing proceeds. Broker agreements should prohibit the broker from receiving any compensation from the buyer without the seller’s prior written consent. When a broker collects from both sides, the path of least resistance often becomes a fast close at an acceptable number instead of the highest achievable number after a competitive process.
- In DSO deals, a three-way conflict can arise. When the broker also handles the practice’s real-estate lease, a single intermediary may negotiate the practice sale, the lease assignment, and the management services agreement with the DSO buyer at the same time. Because a DSO earnout measured on practice profitability is calculated after the management fee is deducted, the management fee economically functions as the real price of admission. A broker with interests on multiple sides of that structure has no clean way to advocate for the seller on each element.
How Dual Agents Get Paid In Dental Practice Sales
In a dual-agency arrangement, the broker may collect a fee from both the seller and the buyer or a single fee split between both sides. In either case, the broker’s total compensation is tied to the deal closing, not directly to the price the seller receives.
That fee structure shapes negotiating behavior. A broker who agrees to receive compensation from the buyer creates an incentive to prioritize internal monetization over market-driven outcomes. The aggressive, auction-style tactics that can support higher proceeds include running multiple buyers simultaneously, defending EBITDA add-backs in quality-of-earnings diligence, and pushing for non-punitive earnout structures. Those tactics require the broker to create friction with the buyer. A broker paid from both sides has a structural reason to limit that friction.
A small minority of business brokers collect a separate fee from the buyer, typically 1 to 3 percent of transaction value. That arrangement creates a real conflict of interest by giving the broker a financial stake on both sides of the transaction. The seller should ask for the complete fee arrangement in writing before signing any engagement agreement. For a detailed breakdown of how broker fee structures work, see Dental Practice Broker Commission Rates Explained. This fee context helps frame the decision about consent.
How To Decide On Dual Agency In Your Broker Agreement
For a seller of a premier dental practice, consenting to dual agency is almost always a poor trade. The seller gives up independent advocacy, competitive tension, and valuation defense and receives little that supports higher proceeds.
The seller’s leverage in a dental practice sale comes from a competitive process among multiple vetted buyers. The benefit of competition comes from creating credible alternatives, which increases value when buyers believe they must put forward a complete, executable offer. Dual agency structurally reduces that leverage by giving the broker a reason to keep both parties at the table instead of pushing buyers to compete.
A seller who finds a dual-agency clause in their broker agreement has three main options. They can refuse to consent, negotiate the clause out of the agreement, or move to a sell-side-only advisor whose engagement structure prohibits buyer representation entirely. The seller can also ask the broker to use a designated agency model, where two separate licensees within the same firm each represent one side. However, designated agency can fail in practice if two agents on the same team share a pipeline and an assistant, producing an arrangement that looks designated on paper but behaves like dual agency.
Nothing in this article constitutes legal advice. A seller should have their own attorney review the specific agreement and confirm which state’s rules govern the engagement.
How State Rules On Dual Agency Interact With Dental Practice Sales
Dual agency is regulated primarily at the state level, and the rules most sellers know come from real-estate brokerage statutes. Those statutes do not automatically govern business-brokerage transactions such as a dental practice sale.
As of 2025, several states prohibit dual agency and require in-house transactions to run through designated agency or a transaction-brokerage role instead, including Colorado, Florida, Kansas, Maryland, and Texas. Florida provides a useful example. Florida Statute §475.278 prohibits a real estate licensee from operating as a disclosed or nondisclosed dual agent. Whether that prohibition reaches a dental practice sale depends on whether the transaction triggers a licensed real-estate activity under Florida law.
In many U.S. states there is no standalone state-issued business-broker license. Instead, intermediaries are governed by real-estate licensing, agency, and common-law rules depending on the jurisdiction. The analysis turns on whether the specific transaction, including any lease assignment, real-estate component, or change of ownership, triggers a licensed real-estate activity in the seller’s state.
A seller should have their own attorney confirm which state’s rules apply to their transaction and whether the broker’s engagement agreement is governed by real-estate or business-brokerage law. No state-by-state list appears here because the answer is fact-specific and can change as statutes are amended.
When The Seller’s Broker Offers To Represent The Buyer Too
A buyer who accepts dual representation from the seller’s broker steps into a structurally compromised arrangement. The broker already owes duties to the seller and already holds the seller’s confidential financial data, including production reports, payer mix, accounts receivable aging, and provider-level productivity. That broker cannot fully advocate for the buyer’s interests on price, terms, or diligence scope.
Undisclosed dual agency in business brokerage is described as illegal in every U.S. state, while disclosed dual agency can be legal in many states if properly documented. Legal disclosure does not remove the underlying conflict. It only means the buyer was told about it. A buyer who wants independent representation should engage their own advisor before any substantive negotiation begins.
A seller who wants a clean process can insist the broker represent only one side. A dual-agency arrangement that does not fully benefit either party creates a structural advantage for the broker, whose fee arrives as long as the deal closes.
What A Properly Structured Sell-Side Engagement Includes
A practical alternative to dual agency is a sell-side-only engagement. In this model, the advisor represents only the selling dentist, never the buyer, from the first conversation through closing.
McLerran & Associates follows this structure. The firm is dental-only and sell-side only, with roughly 2,000 successful practice sales, approximately $2 billion in closed transaction volume, and more than 10,000 practices evaluated. Its transaction rate significantly exceeds the industry norm, which reflects what a properly structured, competitive process can produce.
A properly structured sell-side engagement often includes the following elements.
- Sell-side-only representation. The advisor represents the seller exclusively and does not maintain buyer relationships or dual fees that discourage auction-style tactics. This structure supports clear advocacy for the seller’s valuation and terms.
- CPA-led, diligence-grade EBITDA analysis prepared up front. The American Dental Association recommends using a specialist dental practice valuator to obtain an independent assessment of the practice’s worth before reacting to a buyer’s initial proposal. McLerran’s valuation is built by a CPA and deal advisor from the ground up. That preparation helps the number hold when the buyer’s quality-of-earnings team scrutinizes it and reduces the risk of a later price reduction.
- A structured, auction-like process among a vetted buyer pool. Comparing multiple indications of interest simultaneously, rather than engaging sequentially with a single buyer, is an effective way to establish a competitive floor. McLerran typically generates around 10 offers per listing in a 45 to 60 day DSO bid process.
- Quality-of-earnings defense through diligence. When the buyer’s QoE team challenges EBITDA add-backs, the sell-side advisor defends the number. The advisor can also remind buyers that other vetted bidders remain in the process if they attempt to re-trade the deal.
- Non-punitive earnout negotiation. Earnout structures, meaning provisions that pay the seller additional amounts after closing only if the practice hits agreed financial targets, can represent a meaningful share of total deal value. EBITDA-based earnouts carry high risk for sellers because post-closing expense shifts or management decisions by the buyer can increase overhead and depress EBITDA even if total collections remain high. A sell-side-only advisor pushes for pro-rata provisions and protective operational covenants.
The table below shows how the three representation models differ on the factors that can most affect seller proceeds: who the advisor represents, who prepares the valuation, and whether the process creates competitive tension.
| Representation Model | Who The Advisor Represents | Valuation Prepared By | Competitive Process |
|---|---|---|---|
| Dual agency | Both seller and buyer | Broker, with no incentive to defend the number in diligence | None, broker avoids auction tactics to keep both parties at the table |
| Transaction broker / facilitator | Neither party as a fiduciary | Broker, with limited duties to both sides | Minimal |
| Sell-side-only advisor (McLerran & Associates) | Seller only, never the buyer | CPA-led, diligence-grade, prepared up front | Structured, auction-like process among a vetted buyer pool |
For a detailed comparison of sell-side advisors and traditional brokers, see Sell-Side Advisor Vs. Dental Practice Broker: What Differs.
Talk to a sell-side-only dental transition advisor.
Questions To Ask A Broker About Agency Before You Sign
The questions below can be sent to any broker in writing before signing an engagement agreement. Clear, written answers help reveal how the broker will behave once the engagement begins.
- Do you represent buyers as well as sellers, and have you represented both sides in the same transaction?
- Will you ask me to consent to dual agency or a dual-representation clause, and can I refuse without losing your representation?
- Who prepares the practice valuation, and who defends it when the buyer’s quality-of-earnings team challenges the EBITDA add-backs during diligence?
- How many buyers will you present my practice to, and what specific steps do you take to create competitive tension among them?
- How is your fee structured, and do you collect compensation from the buyer, the buyer’s financing source, or any affiliated entity in addition to the seller?
- Do you also handle the practice’s real-estate lease or any other component of this transaction, and if so, how do you manage the conflict between those roles?
- What is your transaction rate, meaning the percentage of engagements that result in a closed deal, and can you show me comparable closings in my market and specialty?
- Who on your team has dental-specific M&A experience, and who will be working on my engagement from valuation through closing?
- Will you put your agency policy, including whether you ever represent buyers, in writing before I sign the engagement agreement?
For additional guidance on evaluating broker agreements, see How To Choose The Right Dental Practice Broker.
Conclusion: How Dual Agency Becomes A Valuation Problem
Dual agency in a dental practice sale can become a valuation problem because it affects both EBITDA and the multiple applied to it. These two numbers largely determine what a seller walks away with. A practice generating $700,000 in normalized EBITDA transacting at 6x versus 7x represents a $700,000 difference in proceeds. That gap reflects negotiating leverage and process management as much as practice fundamentals. A party whose fee depends mainly on closing rather than on maximizing value should not control that gap.
Helpful evaluation criteria for a sell-side engagement include independent representation, CPA-led valuation, a competitive process among a vetted buyer pool, and an advisor whose incentives align with the seller from first conversation to close.
McLerran & Associates works exclusively on the sell side. Its client is always the practice owner, never the buyer. With roughly 35 years in dental-specific transitions and approximately $2 billion in closed transaction volume, the firm illustrates what a properly structured sell-side engagement can produce for a premier dental practice.
Owners who have not yet decided whether to sell can also attend the McLerran M&A Summit (October 29–30, 2026, Austin), a dental-only educational event offering 4 CE credits and a complimentary practice valuation, to learn more before making any commitment.
To discuss your practice, your goals, and your options, contact McLerran & Associates directly: call (512) 900-7989, email info@dentaltransitions.com, or visit our contact page.
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