Whether you are a startup seeking access to the veterinary space or looking to grow an established practice, buying a veterinary practice may be an option. The best way to protect your rights and ensure that the transaction goes smoothly is to consult an attorney who provides legal services to veterinary professionals.
Key Challenges of Buying a Veterinary Practice
Let’s face it: identifying a veterinary practice, determining its value, and navigating the related legal, regulatory and tax issues can be complicated. This is why it is essential to have proper legal representation. An attorney with the right experience can help a buyer identify a suitable veterinary practice and also determine a proper valuation. You can also rely on your lawyer to structure the transaction, negotiate the deal terms, and prepare the transaction documents.
Do Your Due Diligence
A typical purchase is initiated with a letter of intent, a non-binding legal document that states the parties’ mutual intention to enter in the transaction. A letter of intent typically affords the buyer the right to conduct due diligence by examining the veterinary practice’s financial and patient records. As such, the seller will likely require the buyer to sign a confidentiality agreement. In any event, it takes a skilled attorney to conduct a thorough due diligence investigation, one who is particularly adept at uncovering potential legal liabilities as well as assessing the value of the veterinary practice.
Negotiating the Deal
With an experienced veterinary attorney in your corner, you will be better equipped to negotiate the purchase price, which is based on a combination of tangible assets (e.g. equipment, inventory, furniture, premises, land) and goodwill — the practice’s client base, employees, and reputation.
Other factors must also be considered, such as whether real estate is included in the deal, whether the deal will be structured as an asset sale or stock sale, and the extent to which you, as the buyer, are assuming liabilities.
Because acquiring a veterinary practice represents a significant investment, it takes a skilled attorney to negotiate the payment terms, which may involve a combination of cash, a promissory note, and earn-outs (deferred payments based on revenues). Your attorney can also help to secure financing from a reputable lender with working knowledge of the veterinary space. It is worth noting that loan terms are largely determined by the purchase price, the cash flow of the practice, and collateral — typically a percentage of the practice’s tangible assets.
The Takeaway
Buying a veterinary practice can be a lucrative venture and an exciting experience, but a successful transaction requires careful planning. The best way to protect your interests is to consult an experienced veterinary attorney.