THE TRANSACTION VOW: “DO I HAVE A WILLING PARTNER?”
Step #1 when buying or selling a practice
Do I have a willing partner? That’s the first question both physicians exploring the possibility of a practice transaction should ask to determine whether or not the other party is actually a qualified partner or simply dabbling with the idea of buying or selling a practice. In more than two decades of overseeing healthcare transactions, thoroughly answering this qualifying question has proven critical to facilitating countless practice transactions. Taking this step also helps qualified buyers or sellers avoid wasting time, money and energy pursing opportunities with physicians not vetted or serious about the prospect of a transaction.
Consider this scenario:
A selling physician (Doc A) turns to intuitive and anecdotal information rather the qualitative data to determine what they believe is the value of their mature practice. A young physician (Doc B) is interested in possibly buying the practice, but is unsure if the asking-price is reasonable, and hasn’t considered the process to finance a purchase.
So, how do we determine if both parties are willing? What are some of the signs?
NOTE—PRICE SHOULD NEVER BE DISCUSSED BEFORE DETERMINING BOTH PARTIES WILLINGNESS.
5. Initial dialogue between the two parties is focused on the potential for a deal and not the terms of a deal.
4. The selling doctor is open to sharing limited practice information including financials at an appropriate pre-determined time later in the process.
3. Both physicians are open to mutually agreed upon intermediaries to help negotiate a fair transaction from arm’s length.
2. Both physicians focus on the reasons a transaction will be successful rather than considering the reasons it could fail.
And the #1 sign?
Both parties sign a Non-Disclosure Agreement (NDA) allowing information to flow freely between parties with the protection of confidentiality. NDAs are very simple and common documents in practice transactions. In fact, some versions are available as templates on Website like Legal Zoom, which can eliminate the expense of having an attorney draft one on your behalf.
By considering these signs, you can confidently confirm that you do have a willing partner and there by avoid short-circuiting a deal before it even gets started.
Our next entry will follow Doc A and Doc B through the NDA process.
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