1. Not being ready

Selling a medical practice is a big decision. All the more reason why you should take the time and effort to thoroughly prepare for the sale, and have all documentation ready for the handover. Failing that there may be setbacks and obstacles that delay the transaction, which will inevitably cost money.

It is important to work through these issues methodically and not rush into a sale.

2. Not having key contracts in writing

When selling a medical practice, you will want to ensure that all key contracts in relation to the practice are documented in writing. Not only is this common sense from an administrative and risk management perspective, but it will be an encouraging sign for a buyer carrying out due diligence in relation to the practice.

3. Not valuing your practice accurately

You will want to ensure that the sale price you set for your medical centre is an accurate reflection of the assets and the goodwill of the practice.

Preparing an inventory of assets (including plant, fixtures and equipment) is the first step. Consider getting an independent valuer to then value your practice. Apart from giving you a good indication of how much your practice is worth, this will enable you to calculate the goodwill attached to your practice.

What is goodwill? Goodwill is a type of ‘intangible personal property’, and is the drawcard that attracts customers to a business. Goodwill in a medical practice is based on the reputation that the practice has established over the years, from the skills and personality of the practice principals and other key staff.

4. Not maintaining confidentiality

Negotiations and information exchanged between the seller and the buyer should be treated at all times as confidential. This will normally be addressed in an Expression of Interest or Non-Disclosure Agreement signed prior to entering into a Contract of Sale. You don’t want a competitor obtaining valuable information about your practice for example.

When engaging in negotiations prior to selling a medical practice, you will want to take care to not breach any confidentiality obligations that you are subject to. This includes obligations to keep patient information confidential. At the same time, you will want to give a buyer enough information for them to properly carry out due diligence.

5. Giving the buyer inaccurate information or making false representations

You should ensure that all information that you provide and all representations that you make to the buyer when selling a medical practice are accurate and truthful. If you make misleading pre-contractual statements or representations about the practice, e.g. about the state of its finances and the size of its patient base etc., the buyer may have contractual and statutory remedies against you.

6. Not arranging a handover process

A prudent seller will take the time and effort to arrange a structured handover process, to ensure the practice runs smoothly as possible post-sale. This may include:

  • discussing ongoing patient management with the buyer;
  • introducing the buyer to practice principals and key staff; and
  • negotiating a training period or handover period where you continue to be present at the practice for a set period of time post-sale.

7. Not notifying patients and staff

In selling a medical practice, it is in the interest of both the seller and the buyer to properly manage patient relations as the practice changes hands. You should consider notifying patients of the change in ownership, such as through local newspaper notices or writing to patients individually.

Key staff should also be given notice of the sale of the practice. Staff will know that a sale is happening and the sooner the seller communicates to them that their jobs may not be at risk, the better.

8. Not making use of experienced advisors

You may know your practice inside-out, but do you know the inside-outs of selling a medical practice? This is where experienced legal and financial advisors, and brokers are useful. They can advise you on the legal and tax implications of the sale, and manage the sale process. In particular, an experienced commercial lawyer can guide you through the transaction and prepare the necessary documentation for you.

Getting professional advice is an additional cost, but is money well spent, as it can facilitate the transaction and help you avoid unnecessary commercial risks.

9. Not thinking about risk management

When selling a medical practice, you should also take ongoing risk management into consideration. Although you are selling your practice, your liability to patients does not end there. Consider ensuring that medical records will continue to be managed properly post-sale, and arranging for continuing access to records in the event of a complaint arising in relation to past treatment.

10. Not being aware of your legal obligations

A seller should be fully aware of their legal obligations in selling a medical practice, or get professional advice in this respect. Things you should consider include:

  • whether you need any third party consents for the sale to happen, e.g. landlord’s consent to assign a lease (if the practice is on leased premises);
  • whether there are any security interests in assets being sold that need to be discharged;
  • whether any licences need to be assigned; and
  • whether any ongoing services contracts need to be transferred.

You should also be aware of any restraints of trade contained in a Contract of Sale, which usually prevent the seller from operating a competing business, soliciting patients and poaching staff for a period of time after the sale within a certain radial distance. These restraints can also apply in the period between signing the Contract of Sale and completion of the sale.

How we can help

The Corporate & Commercial team at Panetta McGrath can assist you with selling your medical practice. To speak with or make an appointment with one of our lawyers, click here.