Whether or not a broker is involved, the sale of your practice, or purchase of a practice, is an important and multi-faceted decision and process.
The selling doctor should have a practice appraisal conducted and packaged in a comprehensive manner. Avoid ‘rule of thumb’ formulas because they do not value the practice’s future income. Selling doctors need to be prepared before receiving buyer inquiries. A buyer’s starting point is to search and research practice for sale opportunities.
Buyer prospects should sign a non-disclosure agreement (NDA) and assure confidentiality. When making the initial contact with the seller, be prepared to tell the owner or broker a little about yourself. You want information on a practice to determine if it could be a fit. Conversely, the selling doctor needs to know if the buyer would be right for the practice. A broker’s duty is to introduce suitable parties to each other.
Due diligence is the process of investigation. Partial due diligence may include insurance credentialing, securing a lease for the premises or real estate purchase, and analyzing the seller’s information package and having operational questions satisfactorily answered. The buyer can then lay out a plan of operation along with an income projection.
Financing. A preliminary bank loan commitment letter prior to closing is helpful. Financing is not a simple subject. The loan must go beyond what is required to buy the practice. The buyer must include adequate operating capital into the initial loan. The good news is that it’s easier to obtain a loan for an existing practice than for a startup scratch. Selecting the right bank and banker is key.
Letter of Intent. The letter of intent serves as an intermediate document before drafting a final purchase agreement. It is usually non-binding and summarizes the main terms of the purchase/sale. With a mutually agreed upon Letter of Intent, the bank can start the loan process.
Purchase Agreement. Upon being in agreement with the Letter of Intent, the Purchase Agreement should be promptly drafted. It is the most important and complex document. The first part is in structuring the sale. Will it be an Asset Sale or an Entity Sale such as LLC or Corporation? The majority of chiropractic transactions are Asset sales, however some Entity sales can be appropriate. The agreement reflects the entire understanding between buyer and seller, and consists of around 26 basic sections plus exhibits, including customary warranties, conditions, HIPPA regulations, tax allocation.
Contingencies must be worked on diligently to satisfy contingencies and solidify the agreement in a timely manner.
Closing. The practice is transferred from seller to buyer, funds distributed, and transition begins.
Sellers and buyers should expect the Broker to bring value to the relationship by guiding them in making the best decisions. A broker’s role is to widen the buyer search and help with every phase of the sale process.
As a Broker, it’s a privilege and responsibility to assist chiropractic physicians in completing successful transactions. We work on your behalf as a proud MCA member.
Practice Opportunities, Inc.
Phone: (952) 322-1177 and (952) 953-9444