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.
In our final post in this series, we look at ways to structure asset purchase agreements to resolve disputes that may arise after the asset purchase agreement has been executed. Although the goal of every agreement is to clearly define the rights and obligations of the buyer and seller, disputes can arise even with the most careful planning and best intentions. A well-crafted asset purchase agreement will have mechanisms for resolving potential disputes in a fair and cost-effective manner so that you can continue to build your medical or dental practice.
Our previous posts in this series looked at different ways you can structure the exchange of assets in a practice purchase agreement. This post will look at a different topic: how non-competes can be structured so that a buyer can preserve the value of his investment in the practice, while a seller can continue to pursue his career without overly burdensome restrictions.
In our previous posts in this series, we looked at the allocation of the purchase price and the treatment of accounts receivable. In this post, we examine how to handle work in progress (or work in process, depending on the verbiage your attorney uses). These are patients whose treatment requires several visits and are most commonly an issue in dental and elective surgery specialties such as orthodontic, periodontic and cosmetic practices.
In many cases, the patients have paid up front for the work. Whether you are buying or selling a practice, you must account for these patients and the money they have already paid. You have several options to accomplish this, depending on the circumstances of each case.
In our previous post in this series, we looked at the allocation of the purchase price between equipment, goodwill and non-competes. In this post, we examine the treatment of accounts receivable in the sale of a practice.
The importance of accounts receivable to an asset purchase agreement often depends on the type of practice you have. If you have a fee-for-service practice where your patients pay upfront for all of the work you will do, accounts receivable may not be a significant part of the transaction. However, if you accept payment over time, or some or all of your practice is insurance-based, then you will often carry significant receivable balances that must be accounted for in the asset purchase agreement. Although there can be variations, there are two ways general ways in which receivables are treated in asset purchase agreements:
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.