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May 2, 2017

The Importance of Due Diligence When Buying a Healthcare Practice

Buying a healthcare practice requires extensive research, diligence and a clear understanding of what is being acquired.

After all, it isn’t simply transaction such as the purchase of a building.

Buying a practice holds significant responsibilities which extends beyond its bricks and mortar and includes not only staff but also its patients, relevant tenants, and even non-compete agreements which might already be in place. 

Whether it’s a full sale or a clinical affiliation, both parties are strongly advised to carry out due diligence to ensure a fully formed picture of the situation is formed. 

Such an audit is vital to fully inform the prospective buyer, and allowing the seller to share vital details, prior to purchase to ensure any nasty surprises further down the line and to make sure any discussion points have been highlighted.

Conducting due diligence ensures buyers get the opportunity to examine the practice’s finances, legal issues, clients, and strategies before the sale progresses any further.

It removes the fear of any issues appearing at an advanced stage of the transaction and ensures both parties are safeguarded and fully informed.

Catherine James, corporate commercial executive at leading business advisory firm Greenaway Scott, said:

“We always strongly advise our clients to undertake due diligence at an early stage to ensure they have carried out a thorough evaluation of the business before the transaction progresses.

If you are considering purchasing a practice, we would advise you to make extensive enquiries as part of the due diligence process. Make a list of all the areas you would like to evaluate as part of this, and don’t be afraid to ask.

You are entitled to enquire about all aspects of the practice, with everything from equipment contained within it, to complaints against it, and staff terms and conditions all part of due diligence.

It is extremely important you ask all the relevant questions now to avoid any possible issues at a later stage. While due diligence can be viewed as potentially ineffective, it can serve to create a more smooth and efficient transition further down the line.”

Miss James has highlighted certain areas that all prospective buyers should query when undertaking due diligence.

  • Finances – Are there any significant debts that you should be made aware of? Understand the query the mortgage situation and other monetary factors.
  • Assets – What is included in the sale and what isn’t? Is he equipment leased or owned?
  • Employees – How many staff are there? Are there any ongoing disputes? What are their terms and conditions?
  • Legal issues – Is the practice currently subject to any ongoing legal disputes? Or is it at threat of legal action?
  • Statutory requirements – Is the practice compliant with all these?
  • Future plans – Is the seller planning to relocate and set up a practice within the same geographical area? If so you may need to consider enforcing a non-compete agreement.

 This article was first published on Business Wales on the 2nd May 

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