There may be a situation where physicians will have the probability of selling their practice due to retirement, illness, or any financial necessity. This procedure has to be planned and executed well as it has to offer maximum profit and minimal liability after the completion. The COVID-19 pandemic has impacted the regular functioning of several practices, leading physicians to make crucial decisions. It is wiser to experienced consider real estate investment advisors for making the process smooth and flawless. Keep reading below to know the common mistakes that may be done while selling the Practice to Private Equity.
Approving On Final Amount Without Consulting An Expert:
Some physicians look to sell the practice without discussing with a qualified real estate agent to finalize a reasonable listing price. This will lead to valuing their practices on aspects that may have no relevance to that given situation. This approach usually results in selling the practice for much less amount than its actual value or not reaching probable buyers. Physicians must contact a professional real estate expert who can accurately value the medical practices in any precise location or niche. This process is key in getting the best deal for the practice and avoiding any impractical deeds.
Finalizing On Terms And Conditions Before Discussion With A Lawyer:
There may be a situation where both sides may decide on various terms and conditions of the transaction without any advice from an attorney. After this deal, an attorney may go to “draw up the documents” depending on the agreed terms and conditions. But it would be hard or almost impossible to implement any variations suggested by the attorney to safeguard the seller, as the buyer would have agreed on all the key items in their mind. The deal should be done against the advice of counsel or there are chances of the upset buyer suing the seller on the previous agreement. If the physician has decided to market their practice, they should have an expert attorney to draft the agreement, which will be the sole initiating aspect for sale negotiations.
Executing Representations And Contracts That Cannot Be Added In Final Stages:
In few situations, the buyer may reach the seller with a draft buying contract, either earlier or after the beginning of sale consultations. In such situations, the draft agreement generally comprises both reasonable and impossible contracts. It is advised for selling physicians to skip performing this activity and emphasize other crucial aspects like the amount and terms of the contract. This will avoid any kind of impossible aspects coming back in the future and cause any issues to the sellers.
Not Getting A Few Important Representations And Warranties From The Buyer:
While buyers usually require to make minimal representations and warranties than sellers, few are critical for the sellers to be on the safer side after completing the deal. Critical ones among these are warranties include buyer should be qualified to practice medicine in the particular state. It also includes having good terms with the medical board of that particular state and is not facing any disciplinary action. Even though representations and warranties may not guarantee the respective physician being named in misconduct or any disciplinary action due to the misconduct of the buyer, they will act as the foundation for further actions in the case of any false claims in the later stages.
Failing To Study The Assignability Of Important Third-Party Contracts:
There is an occurrence of a situation where physicians who are already in the process of sale that their agreement is not free to be transferred to any new buyer. Typically, it is impossible to get a fresh agreement from a third party. In the situation of the deal being pleasing to the buyer due to attractive price, failing to check all the restrictions in the primary stages can result in the reduction of the final deal, delay in completing the process, and even lead to canceling the agreement.
No Termination Options In The Agreement:
Even with genuine intentions, there are chances for a deal to not be completed by the expected closing date. It is ideal to extend the closing date but only after the mutual consent of the parties. In case of buyer facing difficulty to make the payment without proper financing, or any of the two parties not meeting any other preclosing requirements, there may be a necessity of dismissing the transaction and start the new practice all over again. But, without clear termination options in the agreement, the buyer can withhold the sale forever, or, in case of any problems with the seller, the buyer may have the situation for holding the seller to the agreement.
Giving The Nod To An Open Non-Competition Clause:
Noncompetition sections in the agreement are the terms that limit the ability of the selling physician to endure his medicine practicing after the deal. This clause differs across various states, but these usually valid if they are limited to some number of years, location, or both. While it will be an irreversible and huge issue left with no other choice of waiting for any probable issues to be creeping up later and then follow the legal course to limit the scope of a noncompetition clause. An initial overlook of all the aspects in the document can provide peace of mind in later stages while also avoiding any surprises.
Many of the probable mistakes while selling a medical practice can be evaded via proper planning and analysis with the aid of expert and reliable real estate investment advisors. Zeustra is a comprehensive strategic M&A advisor with a major emphasis on healthcare services companies and associated organizations. We have a group of expert professionals who can aid you in a range of actions like selling your practice, buying a practice, or selecting a strategic partner to grow your healthcare services platform.