When you are buying or selling a healthcare practice, even simple, straightforward transactions can become needlessly complex. Miscommunications and misunderstandings over key terms of the transaction can emerge, requiring the parties to spend unnecessary time, energy, and money on attorneys’ fees to resolve disputes. One of the best ways to avoid, or at least minimize, these misunderstandings is through a letter of intent, also sometimes referred to as a memorandum of understanding or a term sheet.
When you are negotiating an asset purchase agreement, either to buy or sell an existing practice, there are provisions that may seem innocuous or appear to be standard boilerplate terms. However, these terms can have considerable financial and legal impacts, regardless of whether you are the buyer or seller. This series of blog posts will identify some of these provisions, and explain their significance, in order to help you make an informed decision.
Usually, the first of these provisions you will see as you read the asset purchase agreement is the provision regarding the allocation of purchase price. This may seem unimportant, since you and the other party have agreed on the overall purchase price. However, the method in which that price is allocated between equipment, goodwill, and possibly the non-compete agreement, can have significant consequences.