Mergers and Buyins

Developing an equitable method of valuation and payment structure between the senior doctor and the junior doctor involves a host of considerations. At Practice Concepts we’ll help structure a win-win solution for all parties. Valuations, equity vesting periods, compensation packages and financing all are key components for a successful partnership.

EyeASSIST

Through the EyeASSIST program Practice Concepts offer a custom three phase approach to completing the buy in process

Phase I

• Determine the buy – in value
• Provide market evaluations based on a buy – in scenario
  

Phase II

• Help negotiate a win – win solution and structure for both parties
• Structure the agreements including exit strategies for senior doctors
• Develop compensation packages for both parties
• Discuss financing options

Phase II

• Structure and prepare agreements for review by attorneys
• Interface with accounts and attorneys to complete final documents
• Assist and advise in obtaining financing for junior doctor

What I should know about buying into an existing practice.

Communication is key.
Communication is the most important aspect of the arrangement. If you are the new partner it doesn’t mean that you be overly forceful or demanding. Both parties should communicate their future goals and expectations. Does the senior doctor wish to reduce their hours? Is there an expectation that the junior doctor brings in new patients or increase production?

Be respectful of each other.
The senior doctor has built an office over numerous years. They will have spent more time in their office than at home. Education levels, skill sets and styles may even be different between both parties. It is important to respect each other and be mindful of the other person’s needs and desires. Put yourself in their shoes and see things through their eyes.

Valuing the practice.
The final value of a practice based on a buy –in will be different that the value for an outright purchase. Typically purchases are assets only and buyers do not assume an liabilities. However, a buy in of an ongoing office will incorporate existing loans, leases and payable. These must be taken into consideration for a partnership.

Compensation packages.
Compensation packages for each partner should be fair and should incorporate several elements based on the responsibilities of each partner and the amount of time each person works per week. Fair compensation structures and steady practice revenue increases will insure further success.

Develop an Exit Strategy.
How long does the senior partner wish to work? At some point the senior doctor will reduce hours or retire. Develop a plan to insure that the younger doctor and purchase the remaining equity. Agree on a formula for determining the value at a later date. The agreement should include plans other exiting scenarios such as a partnership break up, disability or death.

Set a method of valuation.
Incorporate a method or formula for valuing the practice. This reduces potential conflicts in the future.

Put things in writing.
Always have an agreement in writing. This insures against arguments and miscommunications as well as offering protection for the spouses or estates.

Consideration for the Junior doctor.
Purchasing equity may require a reduction in your net compensation while the loan is being repaid. This reduction can be offset buy increased production and revenue for the practice. The more you increase revenue the more equity is built over time.

Consideration for the Senior doctor.
Selling a portion of equity in your practice will mean a reduction in your total salary or compensation. This is offset by monthly loan payments for repayent of the loan or an upfront cash payment. If you reduce your work hours or production level this may also change your compensation. Your benefit is having a partner to help continue to grow the practice as you move toward retirement. A partner will also share in the responsibilities of ownership. For example, you may enjoy a vacation and feel comfortable that someone you trust (an owner) is still managing the office while you are away.