Selling a Medical Practice: Business Broker Listing Agreement Basics

Business Broker Listing Agreement

Business Broker Listing AgreementBy: Amanda Bhikhari

Many physician groups and health care companies will enter the market at some point to sell their business. In the rare case, the selling group will already have a buyer who is ready and willing to pay and close on the business sale. More often than not however, most sellers will utilize the services of a business broker to help find a suitable buyer, and will compensate the broker on a commission basis upon closing.  Unlike real estate closings, whereby the main concern is the title of the property being conveyed, medical practice sales require much more detailed representation on all aspects of the business, including but not limited to, real property, existing contracts, existing patients, and medical equipment.

Before signing a business broker listing agreement, ensure that the following points are considered to avoid potential pitfalls:Continue reading

What To Consider When Buying A Medical Practice

As physicians retire and the era of healthcare reform rocks physicians, opportunities to purchase practices will likely surge, and not just for entities that employ physicians, like hospitals.  The big issues generally break down like this:

  1. What to pay;
  2. How to structure it; and
  3. How to pay for it.

The Price

It depends on what you’re buying.  If all of the practice income is from personal services performed by the selling physician, the answer is generally “not a lot.”  The price typically consists of (1) the value of the fixed assets (e.g. equipment, furniture), and (2) maybe a little more in order to avoid the cost of starting up a new practice from scratch.  In the event, however, the practice also generates income from services that are not personally provided by the selling doctor, the price is increased to account for this “passive revenue.”  How much?  Maybe the amount of one year’s profit from that ancillary service.

Structure

Practice purchase take one of two forms:  (1) stock purchase, or (2) asset purchase.  Buyers that buy the stock of a medical practice are rare because the buyers get all the liabilities associated with the stock of the selling practice.  Most practice purchases are asset purchases, which makes it easier to say what you’re buying, what you’re not buying, which liabilities you want to assume (e.g. leases) and which ones you don’t want to assume.  Sellers often prefer stock purchases because the seller gets better tax treatment on the purchase price (capital gains instead of ordinary income) than sellers who sell just their assets.

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