Private medical and dental practices are routinely valued based largely on goodwill. Bank of America recently observed that approximately 80% of the value acquired in a typical dental practice transaction consists of goodwill rather than tangible assets. Yet lenders routinely advertise financing of up to 100% of acquisition costs for qualified borrowers, and the American Dental Association notes that many lenders will finance the full purchase price of a practice despite substantial student debt carried by the buyer.
That combination creates an obvious tension. The goodwill being acquired must not only be valuable; it must be identifiable, transferable, and sufficiently protectable to support both the transaction and the financing behind it.
The challenge of protecting purchased goodwill
Historically, that was not a particularly difficult problem. A seller sold a practice, got paid, agreed not to compete, and moved on. California's sale-of-business exception, codified in Business and Professions Code § 16601, was built for precisely that type of transaction, allowing buyers to protect the goodwill they had purchased. Modern health-care transactions, however, increasingly look different. Sellers often retain equity, remain employees, provide consulting services, or otherwise continue participating in the business after closing.
According to FOCUS Investment Banking, approximately 130 private-equity-backed DSOs were operating in the dental market as of mid-2025, with more than 100 dental transactions occurring annually since 2021.1 Lincoln International reported more than 120 dental add-on acquisitions in 2024 alone, the highest volume among health-care services subsectors.2 As that market has matured, rollover equity, earnouts, retained ownership, and continued participation after closing have become increasingly common features of health-care transactions. As those structures become more common, the question is no longer simply whether goodwill was sold. The question is what goodwill was sold, what value was transferred, and whether the transaction documents adequately describe both.
Those developments have made it less obvious when goodwill has actually changed hands. That helps explain why Samuelian v. Life Generations Healthcare, LLC attracted so much attention when it was decided in 2024.3
The transaction in Samuelian involved sellers who transferred a substantial ownership interest while retaining a minority stake after closing. Prior to Samuelian, many practitioners assumed that California's sale-of-business exception worked best when the seller was actually leaving. That assumption was not irrational. When a seller exits completely, it is relatively easy to conclude that goodwill has changed hands. Once that assumption no longer applies, the analysis becomes less straightforward.
When the seller stays, the analysis changes
What makes Samuelian interesting is not simply the outcome. The court appeared less concerned with the formal structure of the transaction than with what the buyer had actually purchased. The analysis focused on the goodwill and business interests that had been transferred and whether the restriction reasonably protected that value.
That focus may ultimately prove more significant than the outcome itself. For decades, a seller's departure often served as a practical proxy for the transfer of goodwill. Samuelian suggests that courts may be willing to look beyond that proxy and examine the underlying economic substance of the transaction. If the enforceability of a restriction turns on what goodwill was actually transferred, then demonstrating that transfer becomes increasingly important.
If you can't document it, can you protect it?
That may also explain why transaction structure and drafting deserve greater attention. In the traditional sale transaction, the facts largely spoke for themselves. Modern transactions leave more room for ambiguity. As a result, the transaction documents increasingly become the primary evidence of what goodwill was transferred, what value the buyer paid to acquire, and why a particular restriction is necessary to protect it.
In that sense, Samuelian is not merely a case about enforceability. It is also a reminder that the economic substance of the transaction must be reflected in the documents themselves. Retained equity, continuing employment arrangements, consulting relationships, earnouts, and the precise description of the goodwill being transferred may therefore play a larger role than parties appreciate when these restrictions are later tested.
As transaction structures become more complex, the transfer of goodwill can no longer be assumed. It must be demonstrated.
References
1. Yetter E. 2025 dental transactions update. FOCUS Investment Banking. June 30, 2025. https://focusib.com/insights/article/2025dental-transactions-update/2025-dentaltransactions-update/
2. Dental's global sector health in 2025. Lincoln International. 2025. https://www.lincolninternational.com/ perspectives/articles/dentals-global-sectorhealth-in-2025/
3. Samuelian v Life Generations Healthcare, LLC, 104 Cal App 5th 331 (2024).
