The market for selling a medical practice is very active. Physicians that run these practices and are considering an offer are wise to carefully review their options. Another practice, hospital or private equity firm may have expressed interest in purchasing the practice, but is it the right business move for your business?
The group can benefit from a careful review of the motivation behind accepting the deal. Set a tangible goal for your practice. Do you want your practice to continue to stay competitive within the market, to grow organically or to have more resources to serve the community? Would a merger or acquisition deal help achieve this goal? Answer these questions before moving forward with negotiations.
Why consider a merger and acquisition deal for your practice? It is generally wise for small medical practices, those with five or fewer physicians, to grow to stay competitive within the market. This can involve merging with other small practices in the area or selling to a local hospital.
Even larger practices can benefit from these deals. The right merger or sale can allow the practice to grow more effectively.
How can the practice increase the odds of a successful transition? If you choose to move forward with a sale, it is wise to take steps to increase your negotiating power.
Physicians with a clear understanding of their goals and leverage within the market are more likely to reach a successful outcome during a merger and acquisition negotiation. It is important to know the competition. A large, national practice will likely have stronger negotiating power compared to a competitor that is another small, local group. Get an idea of any competition that may exist and take this into account when getting an idea of your group’s bargaining power at the negotiating table.
It is also important to review the agreement as a whole. As a recent publication by the American Medical Association reminds us, it is easy to get caught up in each individual provision, but take a step back and make sure the totality of the agreement reflects your interests.