Practice sales and purchases have a natural flow – an interplay not only of buyer and seller, but also brokers, lenders, attorneys, accountants, landlords and other consultants. A fuller description of the process is at my “Complete Roadmap to Practice Acquisitions [Buyers]” and “Complete Roadmap to Practice Sales [Sellers]” (both open in separate windows). The process generally is as follows:
- Letter of Intent. The Letter of Intent lays out the basic “handshake” deal points and deadlines that should be agreed before proceeding further. Price, source of funding, excluded assets, timelines for due diligence and loan commitments, and non-compete terms all should be included.
- Loan Application. Your institutional lender generally requires a signed Letter of Intent before proceeding to the practice-specific loan application. Your lender will also request LOTS of documentation from Seller (and Broker if applicable). The loan commitment process can take anywhere from three weeks to two months, depending on the parties’ cooperation levels and time of year.
- Due Diligence. The documentation requested by your lender, plus additional due diligence information, also should be delivered to you and your due diligence team. This is also when you tour the office itself and examine the physical layout, equipment, computers, furniture, supplies, and parking.
- Lease Assignment. Once due diligence is (mostly) done and Buyer has a loan commitment, it’s time to connect the landlord’s agent and Buyer’s attorney. Buyer will be expected to complete a loan application and provide financial information. Landlords do not have to be reasonable about making changes to the current lease, including extensions.
- Incorporation. Once Buyer has a loan commitment, Buyers who do not yet have a professional corporation in place should now form a professional corporation to purchase the practice. Limited liability and tax benefits make it near certain that you want a corporation to own the practice. For details on the incorporation process, please see my Incorporation Page.
- Asset Purchase Agreement. Once due diligence is (mostly) done and Buyer has a loan commitment, it’s also time to draft the Asset Purchase Agreement package. This package greatly expands on the Letter of Intent and add very detailed explanations on perhaps 100 different subjects relevant to practice sales. Sellers and Buyers have competing goals, so single representation is almost always the preferred approach. Please see my videos “What Sellers Need from their Attorney” and “What Buyers Need from their Attorney” for details (each opens in a new window).
- Closing. Once everything is signed – Asset Purchase Agreement package, Lease Assignment, loan documents, escrow documents (if applicable), lender-required insurance policies, et al., the lender will fund to escrow, and escrow will make its required distributions. Closed!
- Post Closing Notifications. The work isn’t done once the sale is closed. Many notifications, filings and changes need to be completed – and I send you a list of those matters with hyperlinks once I know the sale has closed.
Legal consultation and documentation for professional practice and other business sales and purchases are available at a flat rate or hourly. Joint legal representation may be available at flat rates only with attorney’s consent and clients’ conflict of interest disclosures and consent – see FAQ: Joint Legal Representation for further details. Clients almost always choose the flat rate. Buyer or Seller, contact me for a free 30-minute consultation to get started on your practice transition!