Two offers for the same business can carry the same headline price and be worth very different amounts. That’s what IDD deal structures decide: how much you get at closing, how much you get later (or never), who carries the risk of a Medicaid rate cut, what happens to your licenses, and what happens to the houses.
This guide explains the structures used in sales of providers serving people with intellectual and developmental disabilities (IDD), in plain English. It covers asset versus stock sales, the change-of-ownership approvals that set your timeline, group home real estate, the six contract terms that matter most, and how nonprofit mergers and affiliations work.
This guide is general information, not legal or tax advice. Rules vary by state, so work with a healthcare attorney and a tax adviser on your specific deal.
Key takeaways
- Asset or stock sale is often decided by your licenses, not your taxes. Know what transfers in your state before you negotiate.
- For ICF/IID facilities, federal rules automatically assign the Medicaid provider agreement to the new owner, including any open plan of correction.
- Group home real estate can be sold with the business, leased to the buyer, or sold separately. Each option changes the price.
- Earnouts, rollover equity, escrows and working capital can move the real value of a deal as much as the headline number.
- Nonprofit affiliations can preserve a provider’s name and local leadership, as the 2026 Merakey and Boundless affiliation shows.
What are IDD deal structures?
IDD deal structures are the legal and financial terms that define how a provider changes hands: whether the buyer purchases the company’s stock or its assets, how and when you’re paid, what happens to licenses and real estate, and how risks like Medicaid rate changes or audits are shared between buyer and seller.
Most owners focus on price, which is natural. But in IDD, structure often decides whether a deal can close at all. A buyer who can’t take over your provider certification on day one can’t bill Medicaid on day one. That single fact shapes a lot of what follows.
Asset sale or stock sale: which IDD deal structures fit your licenses?
In a stock sale, the buyer purchases the company itself, so its licenses, contracts and history usually stay with it. In an asset sale, the buyer purchases selected assets and may need new licenses and provider enrollment. In IDD, whether your certifications can transfer often decides the structure before taxes do.
Here’s how the two compare:
| Stock sale | Asset sale | |
| What the buyer gets | The whole company, including history and liabilities | Chosen assets and contracts, fewer liabilities |
| Licenses and provider numbers | Often stay with the company, subject to state notice or approval | May require new applications or enrollment |
| Past liabilities, like audits | Stay with the company, so the buyer inherits them | Mostly stay with the seller, though some can follow the assets |
| Typical buyer preference | Accepted when licenses can’t easily transfer | Often preferred for tax and liability reasons |
| Typical seller preference | Often preferred, especially for C corporations | Can create higher taxes for some sellers |
Federal change-of-ownership rules help explain why stock sales are common in healthcare. Under 42 CFR 489.18, the transfer of corporate stock is not by itself treated as a change of ownership of the provider, while a merger into another corporation, a consolidation, a transfer of title to the business, or a lease of the facility generally is. States write their own rules for waiver certifications and licenses, though, and many treat any change in control as reportable.
The honest answer for most owners: build your license map first, then let your attorney and tax adviser weigh the structure. Our guide on how to sell an IDD business shows where this fits in the overall process.
Change of ownership approval: the step that sets your timeline
Change of ownership approval is the notice, application or survey your state and Medicaid agency require when a provider’s owner changes. It can take weeks or months, and a deal usually can’t close, or can’t bill, until it’s done. Build it into your timeline and purchase agreement from the start.
The process differs by service type:
- ICF/IID facilities. Under federal rules, the state Medicaid agency must automatically assign the provider agreement to the new owner. The assigned agreement carries its existing terms, including any plan of correction and compliance obligations.
- HCBS waiver services. Group homes, day programs and supported living are certified or licensed by the state. Some states let certifications continue when a company’s ownership changes; others require the buyer to apply as a new provider.
- Local licenses and contracts. County boards, local licensing and managed care contracts may each have their own notice or consent requirements.
In the purchase agreement, change of ownership approval usually shows up as a closing condition, a covenant to file promptly, and sometimes a long-stop date that lets either side walk away if approval doesn’t arrive. Get your attorney to talk to the state agency early. A two-minute phone call can save a two-month delay.
Group home real estate: in the deal, out of it, or sold separately?
It can be any of the three. Many IDD owners hold their homes in a separate company, and they can sell them with the business, keep them and lease them to the buyer, or sell them to an investor. How the group home real estate is handled is one of the biggest value decisions in the deal.
| Option | How it works | Good for | Watch out for |
| Sell with the business | Buyer purchases both the operations and the homes | Owners who want one clean exit | Narrows your buyer pool to those willing to own property |
| Keep and lease | You keep the homes and lease them to the buyer at market rent | Owners who want ongoing income | Market rent reduces the EBITDA the buyer pays a multiple on |
| Sale-leaseback | You sell the homes to a real estate investor who leases them to the new operator | Owners who want to be fully out, with a strong combined price | Lease terms must work for the operator, or the deal gets harder |
Whichever you choose, the lease matters twice. First, the rent flows into the operating company’s earnings and into the price, as we show in the worked example in our IDD business valuation guide. Second, federal rules require residents of provider-owned or controlled homes to have a legally enforceable agreement with eviction protections, lockable doors, a choice of roommates, and access to food and visitors at any time. A buyer will check that the resident agreements and house rules meet those standards.
6 terms inside IDD deal structures that make or break your sale
These six terms decide how much of the headline price you actually keep. Read them as a set: a generous term in one place is often paid for with a tougher one somewhere else.
1. Cash at closing
The simplest and most valuable part of any offer. Compare offers on cash at closing first, then look at everything else as upside with risk attached. An offer with a higher price and a smaller closing payment can be worth less than it looks.
2. Earnouts
An earnout pays you more later if the business hits agreed targets, usually revenue or EBITDA, over one to three years. Earnouts bridge a gap when buyer and seller disagree on the future.
In IDD, the key question is who carries the rate risk. If your state cuts rates, is your earnout adjusted, or does it just miss? KFF estimates the 2025 reconciliation law will reduce federal Medicaid spending by about $911 billion from 2025 to 2034, so this isn’t a theoretical concern. Negotiate targets you can influence, clear definitions, and protection if the buyer changes how the business is run.
3. Rollover equity
With rollover equity, you reinvest part of your proceeds in the buyer’s company, usually a private equity-backed platform. If the platform grows and sells again, your stake can pay out well. It’s often called a second bite of the apple.
It’s also real risk. Ask what share of the platform you’ll own, what rights you’ll have, how debt sits ahead of you, and when the next sale is expected. Rollover works best when you believe in the buyer’s plan and can afford to wait.
4. Escrows, holdbacks and indemnification
Buyers typically hold back part of the price for a period after closing to cover problems that surface later. In IDD, the big worry is Medicaid: overpayments or billing errors from before the sale that an audit finds afterward. Negotiate the size and length of any escrow, caps on your liability, and clear lines between issues you’re responsible for and ones the buyer accepted.
5. Working capital and Medicaid receivables
Most deals assume the business comes with a normal level of working capital. Because Medicaid can pay on a lag, receivables are a large part of that. Agree on how the target is set, usually a trailing average, and how receivables collected after closing are handled. Small wording choices here can move tens of thousands of dollars.
6. Employment, consulting and non-compete terms
If the buyer wants you to stay, you’ll sign an employment or consulting agreement. Get clarity on your role, pay, authority and exit terms. You’ll also likely sign a non-compete. Courts generally treat non-competes tied to the sale of a business more favorably than ordinary employee non-competes, so assume it will be enforced and negotiate the scope and length.
How do nonprofit IDD mergers and affiliations work?
Nonprofits don’t have owners to buy out, so they combine through mergers, affiliations or asset transfers. In a merger, one organization absorbs the other. In an affiliation, a larger system often becomes the sole member of the smaller one, which can keep its name, board and local leadership. State attorney general notice is common.
A nonprofit IDD merger or affiliation usually takes one of three forms:
- Full merger. Two organizations become one legal entity. Simplest long term, but the smaller organization’s identity usually disappears.
- Member substitution, often called an affiliation. The larger system becomes the sole member of the smaller one, which keeps its legal identity and often its name and local board. This is how many nonprofit IDD combinations are structured.
- Asset transfer. One organization transfers its programs and assets to another. Useful for winding down, but it raises the most questions about charitable assets.
The 2026 Merakey and Boundless combination is a good example of the affiliation model. Boundless, an Ohio IDD nonprofit, will continue operating under its established name and keep its leadership team and local governance, while sharing national infrastructure with Merakey. The combined organization expects more than $1 billion in annual revenue and over 11,000 employees across 12 states. Both organizations pointed to workforce shortages, rising costs and regulatory complexity as reasons to combine.
What boards need to think about
- Fiduciary duty. Directors must show they considered alternatives and that the deal serves the organization’s mission.
- Attorney general review. Several states require notice before a nonprofit merges or transfers significant assets. In Pennsylvania, health care nonprofits must give the attorney general written notice at least 90 days before certain transactions, and the review looks at fair value, charitable assets and community impact.
- Mission protection. Affiliation agreements can protect the name, local board seats, service commitments and restricted funds. Write them down.
- Staff and families. The same continuity questions apply as in a for-profit sale. Plan communication with the partner.
Which IDD deal structures fit your goals?
Match the structure to what you want most. If you want a clean exit, prioritize cash at closing and a simple real estate solution. If you want upside, consider rollover equity with a buyer you trust. If you want continuity, look at nonprofit affiliations or buyers willing to commit to your team in writing.
| If your top priority is… | Look for… | Be careful with… |
| Maximum cash now | High closing payment, sale of homes or sale-leaseback | Large earnouts and long escrows |
| Long-term upside | Rollover equity with a growing platform | Debt ahead of your stake, unclear exit timing |
| Continuity of care and staff | Nonprofit affiliation or a regional buyer, with written commitments | Vague promises that aren’t in the agreement |
| Ongoing income | Keeping the homes and leasing them at market rent | A lease the operator can’t sustain |
For a view of which buyers typically offer which structures, see who buys IDD services companies. If your business is mostly residential, our guide to putting a group home business for sale covers the site-level details.
Frequently asked questions
Does the state have to approve a change of ownership?
Often, yes. Many states require notice, approval or new provider enrollment when a licensed or certified IDD provider changes ownership, and timelines vary. For ICF/IID facilities, federal rules automatically assign the Medicaid provider agreement to the new owner. Talk to your state agency early and make approval a condition in the purchase agreement.
Is the group home real estate included in the sale?
Only if you choose to include it. You can sell the homes with the business, keep them and lease them to the buyer at market rent, or sell them separately in a sale-leaseback. Each choice changes the price, because market rent lowers the operating company’s earnings. Model all three before going to market.
What is rollover equity in an IDD sale?
Rollover equity is when you reinvest part of your sale proceeds into the buyer’s company, usually a private equity-backed platform. If that platform later sells for more, your stake grows, which is why it’s called a second bite of the apple. It carries real risk, so understand the terms before you agree.
Is an asset sale or stock sale better for an IDD provider?
It depends on your licenses, your tax position and the liabilities involved. Stock sales often keep licenses and provider numbers in place, which matters in IDD. Buyers often prefer asset sales to limit inherited liabilities. The right answer comes from your state’s change-of-ownership rules and advice from your attorney and tax adviser.
What happens to our mission after a nonprofit merger?
That depends on how the deal is written. In an affiliation, the smaller nonprofit often keeps its name, local board and leadership, as Boundless did with Merakey in 2026. Mission protections, service commitments and restricted funds should be written into the agreement, and some states’ attorneys general review whether charitable assets stay protected.
What is an earnout, and is it common in IDD deals?
An earnout is part of the price paid later if the business hits agreed targets, like revenue or EBITDA, usually over one to three years. They’re used in IDD deals when buyer and seller disagree on the future. Make sure targets are clear, within your control, and adjusted fairly if state rates change.
IDD deal structures: the bottom line
IDD deal structures turn a headline price into the money you actually keep. Start with your license map and your real estate decision, compare offers on cash at closing, and read every earnout, escrow and rollover term with the Medicaid outlook in mind. The right structure is the one that fits your goals, not just the one with the biggest number on top.
| Weighing two offers, or planning for one? Get the IDD Exit Report newsletter for quarterly deal data, or book a confidential conversation with the IDD team at Olympic M&A about how to structure your sale. Disclosure: IDD Exit Report is published in partnership with Olympic M&A, a healthcare M&A advisory firm. |
