You want to buy a healthcare practice? First, build your team of advisors.

If you're ready to buy (or sell) a healthcare practice for the first time, it's crucial to surround yourself with a team of advisors to help you navigate the complex M&A process. The more equipped your are with a proper support system, the better the outcome for you and the future of your business.

In this blog, we'll list the critical team members you should surround yourself with before making an acquisition.

Buy a Healthcare Practice with These Key Advisors

A Trusted Legal Partner with Healthcare M&A Experience

You probably saw this one coming, but it goes without saying that a critical member of your team must be an attorney or law firm that is experienced in healthcare M&A. It's critical your attorney has both transaction experience and experience in healthcare, as buying a dental, medical aesthetic, veterinary, optometry, or other practice is different than a non-healthcare business. There are compliance and practice ownership issues unique to the medical world that a savvy legal team can help you navigate.

Your legal team will help you negotiate deal terms, mitigate risk, conduct legal due diligence, and protect your longterm goals during a transactions.

What happens in the diligence process?

One of our initial steps in the diligence process involves running a lien and litigation search on the potential target. As we like to say, the last thing we want is for our client to “buy a lawsuit.”

We’ve often found that even the most well-intentioned seller has no idea how much outstanding debt she or he may have on the company. You may think that any outstanding monies owed are purely the seller’s problem. However, if you purchase their business without very explicit language to protect you from a such debt or outstanding lawsuit liability…think again. Successor liability are two words that will keep most M&A attorneys up at night. That is, you – as the successor and new owner of the business – can be held liable for past debts and obligations that you had nothing to do with.

This presents itself frequently in the form of back-taxes owed. Many states require a bulk sales tax document to be filed so that the government becomes made aware of the transfer of the business and can inform the parties of taxes owed. When representing a buyer, we go a step further and require a portion of the purchase price to be held back in escrow pending the results of a bulk sales tax filing. Once the respective state gives a clean bill of health for the business that no past taxes are due, we release the funds to the seller. Rather frequently, we have to use some portion of those withheld proceeds to make a payment.

Another scenario arises when there is a need for “re-work.” In the context of a dental transaction, this may mean that the buyer has to re-do a crown on a patient seen before she or he purchased the practice. We don’t want you to have to foot the entire bill, so we will pre-negotiate how such scenarios are handled. This will result in a need to access escrowed funds to reimburse the provider for re-treating at no cost to the patient.

While there are far too many legal risks to list in this blog, it should be clear that you must have a trusted legal partner at your side throughout the purchase process.

A Strong Financial Advisor and Healthcare-Savvy CPA

When clients come to us to buy a practice, the first question we ask is, "Who is on your financial team?"

We're experts in business and legal issues, but a financial advisor (or investment banker) and CPA (Certified Public Accountant) are essential to the M&A process. They'll guide you as you vet the numbers of prospective acquisition targets, assess the tax impact, and guide funding and wealth planning.

More specifically, a CPA and financial advisor should be able to help you:

• Value the business and establish a fair purchase price

• Identify discrepancies in historical data within the target

• Create a pro forma to give you an idea of where you might plan to be in one year, three years, or longer after purchasing the company.

Of course, no one has a crystal ball. You can’t predict changes to the industry or overall economy, but a financial partner should be able to help you forecast conservative numbers (if things don’t trend up as quickly as you might hope) as well as a more aggressive projection (should you be able to rapidly increase the trajectory of the company).

The pro forma will also be necessary if you intend to finance some or all of your purchase, as lenders need data to decide if they are comfortable with the respective level of risk. Though you can certainly create projections yourself, it helps lender confidence to show that an experienced financial expert helped ensure accuracy throughout the process.

An Experienced Broker or Consultant

A broker or consultant with healthcare transaction experience is the last piece of the puzzle. (Sometimes, a financial advisor will serve as a strategic consultant or broker to lead the deal strategy.) Most importantly, a broker will help with buyer/seller alignment. They can help buyers identify key targets, navigate valuation and the LOI process, and keep the deal moving forward successfully for both parties.

Your brokers will collaborate closely with your attorney, CPA, investment bank, and internal leadership team to lead you through the M&A process. There are countless hurdles that can thwart, slow down, or even stop a deal altogether. Your team of advisors should be there to advocate for your best interest and prevent potential barriers from killing the deal.

Buy a Healthcare Practice with Marti Law Group in Your Corner

At Marti Law Group, we are hyper-focused in two areas: healthcare and business. We represent healthcare buyers and sellers at every stage of the transaction process. Reach out to our team to learn more.