Gary I. Glassman, CPA, Burzenski & Company, P.C.

Tel203.468.8133   Fax203.469.8515

E-mail:Gary@burzenski.com

  

You have been in practice ownership mode for many years and now you must begin to pursue the next venue in practice life. The sale of your practice to another veterinarian. Who will that be?

 

How are practices sold? 

Practices are sold at once or over time in transition with an associate. If they are sold at once, the practice entity is usually selling its assets. If the practice entity is a corporation, sometimes the practice stock is sold. This does not occur often though since buyers like to buy assets so they can obtain tax deductions for what they buy during the period of time they are making loan payments.

Who are the buyers?

 Locating buyers has always been a challenge but they can be right around your corner. Who are your choices: Associates, your colleagues, an unknown veterinarian, or a corporate buyer?

 

Associates Buyins: 

Associates can be a great find and make for a natural transition. They know the practice and their buy in can be arranged over time. Associates are usually interested in purchasing your practice and transitioning your way to retirement. They usually want to own the practice real estate as well. Sales of partial interests are accomplished with the sale of stock in a corporate environment or a partnership/member interest in a partnership/limited liability company.

 

Known Colleagues: 

These too may make easy transitions since they are known to you. These can be acquaintances or practitioners down the street who are looking for growth to add to their practice when market saturation exists. They are usually excellent to consider because they create economies of scale for the potential buyer.

 

Unknown Veterinarians:

Unknown veterinarians usually come from ads placed in journals, by word of mouth or through brokers. Brokers are excellent resources in that they create a market that didn’t exist but beware they are expensive. Brokers are paid a commission for selling the practice and they usually take the commission on the practice sales price as well as the real estate if that as sold as well. Their fees are common at somewhere between 6% and 10% of the sales price. Their fees are all inclusive in that they are for valuing the practice, developing a sales package for potential buyers, negotiating the transaction on your behalf and arranging financing for the buyer. They will also coordinate the legal process with attorneys.

Entrepreneurial veterinarians who may wish to purchase your practice will usually wish to purchase the entire practice with a short transition. They normally wish to purchase only selective assets and the practice real estate.

 

Corporate Buyers:

There is an array of corporate buyers in the marketplace. Corporate buyers are many times an attractive alternative to finding a private veterinarian, usually from the economic point of view but there are other things you may have to work through to know they are the right fit for you. They also have criteria for the type of hospital they are interested in buying and you have to fit that criteria for them to make you an offer. Corporate buyers normally pay what is referred to  as” investment value” for the hospitals they buy meaning they pay what it is worth to them as an investor without consideration of traditional financing. This, many times, may mean your hospital is worth more than fair market value as defined by traditional valuation methods. Corporate America, for the most part, is interested in purchasing the practice and transitioning your way to retirement. They are sometimes interested in purchasing the practice real estate and are very much interested in keeping your health care team solidified. They will want you to continue to work in the practice for up to a two year period of time and will pay you typically 20% of production and offer a standard benefit package they offer all. There is very little negotiating to be done in this area.