Owning your veterinary practice has undoubtedly come with highs and lows. An exciting time in a business owner’s life is often selling their practice–whether the motivation for the sale is to take on a new opportunity, move, or retire, there are many items to consider when making the decision. This article will explore the top considerations each veterinarian should consider before diving into the sale process.
There are several different ways in which a veterinary sale may be structured, and this will be largely driven by what the buyer and seller want from the transaction and their various tax considerations. The most common types are: (1) asset sales (which involves the sale of some or all of the assets of the practice, while you still retain the ownership of the company) and (2) stock or membership interest sales (when you sell all stock/interest of the practice so the ownership of the corporate entity transitions to the buyer). While your broker will help you to choose the structure based on your needs, marketability, and existing corporate set-up, your legal advisor will help you to implement the sale structure.
Many different professionals can, and likely should, be hired to make your veterinary practice sale successful.
Once you have interested buyers, both prior to and after a letter of intent is signed, it is customary to engage in due diligence. This is an important process whereby you provide the proposed buyer, either directly or through your broker, with relevant documents from your business to support the proposed valuation, such as your material contracts, leases, past and current financials and projections, and internal policies. To avoid costly delays and difficulties along the way, it is worth requesting copies of documents early, organizing them in one data room for easy access, and then asking your legal advisors to review them upfront so that they can spot potential issues.
A key part of selling a veterinary practice is making it as attractive as possible to a buyer. Therefore, you should review your key employee and vendor contracts to make sure they are all up-to-date and clear. Moreover, many agreements have “change of control” and/or “assignment” provisions that require notice of the sale, give an option to a party to terminate that agreement, or both. Many times, a buyer will want to ensure that key employees stay on with the practice post-sale.
If you have a successful practice that has experienced growth, makes a good profit, and operates in an attractive market, you will probably have your pick of the litter when it comes to buyers. However, even a struggling or fledgling practice may be able to find a buyer with the right team to assist. Have a strategy in place for when you get approached and a realistic picture of what your practice is worth and what steps you will have to take to close the deal.
Veterinary practices are unique in that most principal veterinarians own the real estate where they operate the practice. Pre-sale you will have to decide if you are going to sell the real estate as part of the overall transaction or if you will enter into a lease with the buyer and become a landlord. There are pros and cons to both options depending on your overall goals. Your legal counsel can help you debate this point and draft the requisite documentation.
A large part of the deal will be what you, as the principal veterinarian, want to do post-sale. Many buyers will want the owner to stay on for a transition period post-sale. Sometimes a buyer even wants the prior owner to become an employee for a period of time. Becoming an employee or consultant is often a big transition for someone who has owned their own business for many years. It is important to consider all options and discuss those options with potential buyers.
As you can see, there is much to consider when selling your veterinary practice. However, a good team, hard work, and realistic expectations will get you to the finish line. The professionals at Tucker Arensberg, P.C. are happy to answer any questions you may have. Feel free to reach out to Ashley Wagner at firstname.lastname@example.org or at (412) 594-5550.
October 11, 2023
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