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Biggest Pitfalls in practice transactions

Buying or selling a practice can be one of the highlights of your professional career. At the same time, for some, its their biggest investments while for others it’s the key to their retirement after a lifetime of achievements and success. Its not all roses, however, throughout the transaction and while ideally a transaction runs smoothly from start to finish there are a number of issues that could arise and derail a deal.

Loans and Liens

 

Its hugely important to ask the right questions to uncover any lingering practice or real estate loans well prior to closing of the practice sale. A late discovered loan can create a delay until the parties determine who holds the loan, the pay off amount, and if there are any liens attached to the practice.

Legal Issues

               Does the practice have any outstanding or pending legal claims? This could be malpractice, employment, or even business to business. As an example, a seller might have a business name or logo that potentially infringes on another trademark. If this hasn’t been uncovered, or disclosed, it can seriously impact the deal and the transaction.

 

Corporate matters

Has the seller kept their corporations active? If the seller’s corporation is not in active status, this creates a hurdle to selling assets or the practice real estate. In fact, it becomes a roadblock until that entity becomes active again. As a seller, you want to ensure well in advance that your entity is in good standing and has the ability to transact business, otherwise you will spend additional time and money to bring it to order.

 

Lending

Many buyers seek third party financing to purchase the practice or real estate. What many buyers and sellers don’t realize is the impact and influence a lender might have on the terms of the deal and transition of providers. If there are terms that conflict with the lender requirements, this can create another hurdle for the parties to resolve prior to closing.

While these issues don’t affect every practice transition, they can certainly create a headache if uncovered towards the end of the deal (or after closing!). The key is to prepare early, plan, and do your due diligence whether you’re a buyer or seller in order to optimize you opportunities.