Guidance for Physicians – Practice Sales and Mergers


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There are a lot of reasons to consider cashing in on the clinical practice and associated healthcare related businesses you’ve built.  They might include:

Security:  Monetizing the value you’ve worked hard to build and contracting a guaranteed level of compensation and financial security.

Lifestyle: Reducing the hours and stress of being responsible for both business management and clinical delivery.

Protection:  Adding financial depth and clinical services to enhance resilience and market agility.

But once committed, it’s a difficult and risky process. I’ve seen it all during my time as a financial leader for practice management organizations, including a number of very beneficial alliances. Sadly, I’ve also seen many transactions where the doctors came to regret the sale and their alignment rather quickly.  Given this all-too-common experience, how can you increase the likelihood of a more satisfying and beneficial transaction that meets your clinical, operational, and financial expectations?

The Transaction “Bus”:

You’ve probably heard about the importance of getting the right people on your organization’s “bus”, and in the right seats, so you can navigate clinical and business challenges successfully.  The same is true for a transaction involving the sale of an interest in your medical practice, surgery center, or other clinical delivery business.  You need a team of experts to help you steer toward and successfully close a mutually beneficial long-term deal:

  • CPA / Tax Experts
  • Business Broker / Marketer
  • Diligence and Valuation Firm
  • Transaction Attorneys and Advisors
  • Healthcare and Compliance Attorneys
  • Bankers or Lending Organizations
  • Wealth or Investment Managers
  • Insurance Advisors / Broker

The Case for Culture:

When assessing interested parties, culture is perhaps even more important than financial considerations. Yes, you are interested in receiving a high valuation and immediate cash inflow.  But your happiness and satisfaction with the deal, not to mention the likelihood of achieving projected future income and performance payouts defined by the purchase agreement, strongly depends on how well your organizations work together under the new operating arrangements.  Often overlooked are the ingredients that really drive success… like strategy and mission alignment, governance and decision-making processes, staffing structure, systems integration, performance measures, and the cooperation of key personnel… including physician leaders. You can improve your chances of success and happiness by giving more weight to these factors than to financial considerations alone. Make sure that your advisors have this mindset at heart and are working in your best interest, not just what makes them the most money.

Every Deal is Different:

Set realistic expectations and understand that the value of every transaction will be different.  An acquaintance or competitor may have sold an interest in a medical enterprise for a certain multiple… but your practice may be worth more or less. This may be due to a host of factors, such as market timing, practice size and specialty, geographic region, patient demographics, payor contracts, assets / real estate, debt, etc.  Just as important, your business and clinical operations will have a different value to different types of buyers (e.g., another practice group, private equity, a hospital system, healthcare insurance payor, etc.). The structure of the proposed acquisition will vary accordingly. Keep these matters in mind when evaluating competing offers.

One additional note: The buyer is paying you upfront for the value of your future practice earnings.  The multiple will be higher if they acquire a controlling interest in your medical group.  If they acquire a majority interest, they will exercise decision making authority and will manage toward an expected return on investment that makes the transaction worthwhile to them. Make sure you’ve read the Case for Culture above.

An Upfront Capital Plan:

A consistent source of friction in many deals is a misunderstanding between the parties about on-going capital investment… equipment, computers, software, facilities, etc. The new partner(s) have considered the level of capital investment required to achieve the targeted ROI in their valuations and purchase price.  Make sure that you as the selling partners have access to their detailed capital plan that includes commitments to timing and available sources of funding.


You have probably already gathered that all parties need to have a common and shared understanding of the transaction terms and new operating agreement. Excessively complex terms and legal jargon often appear in purchase documents and operating agreements.  Rarely do they effectively support higher transaction prices and/or compensation. Often, misunderstandings that lead to acrimony and financial underperformance follow. Make sure that your attorneys and transaction advisors incorporate understandable and clear terms and that can be easily and objectively easily observed so that the right behaviors are encouraged among the parties and intended results are accomplished.

Commit to the Effort and Time Required:

Return on investment requires planning and dedication… especially to forming the needed relationships, understanding the plan, and developing a transaction management process. And know that there will be a lot of change, including the roles and responsibilities of some team members and employees. Productivity may drop initially and not everything will always go smoothly.  But having a well-chosen transition team along with effective oversight and a mutual commitment to the necessary time and resources will greatly increase the odds of a successful combination.

Final Thoughts:

Selling an interest in your medical practice and associated businesses or acquiring such an organization can be the realization of a significant financial vision. With the right support and a thoughtful transaction plan, you can receive optimal value, preserve or build culture, develop clinical alignment, and achieve a high level of partner satisfaction.

Med Pro CPA can provide a range of services to support independent physician groups interested in mergers, acquisitions, or sales to interested buyers (minority or majority stakes). These services include exit planning, business brokering, real estate sales, due diligence, and valuation support services.

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