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Dastardly Deal Breakers Impacting Practice Sales
Irrespective of what type of professional practice is for sale, it has to be acknowledged that the process of selling is often far from enjoyable, fun or a stress free experience. We know that there are many steps within a transaction, all of which need to be mastered and managed well. We recommend that anyone considering a transaction ensure they are well versed in current market trends and occurrences to provide the best opportunity for success.
A couple of key areas to be across include:-
As a vendor, this is something that you will want to establish and confirm as early as possible. If you are considering an offer presented by a prospective purchaser, there is no point proceeding to contract and due diligence unless the necessary finance is available. Some vendors are going as far as to have the purchaser provide proof from their financial institution that their offer is supported by the necessary funding.
There are further points to take into consider here. Most financiers have certain criteria that needs to be met. Others will have criteria that they prefer to have included in a deal.
Keep in mind, this is between the purchaser and their financier and may differ to common market terms or what may have been agreed between vendor and purchaser. So importantly, as a purchaser, please be mindful of making an offer and then having to amend the terms to meet your financier’s requirements. A vendor is unlikely to enthusiastically agree to significant changes to an original deal, particularly where the variations are perceived as less favourable.
Furthermore, be conscious of time delays. The more drawn out the process becomes, the less confident the vendor will be that the purchaser can actually deliver and close the deal. Faith is lost and the deal is likely to go pear shaped.
Contract Preparation & Legals
Contract time is often the most stressful part of the transaction where deals can be won or lost. I strongly recommend the selection of a solicitor experienced in the preparation of contracts for sale for professional firms, and who has a practical approach to drafting and negotiating terms. It is imperative to deliver a draft contract in a timely manner as well as any proposed changes. Unforeseen or unreasonable delays are likely to see either party lose faith in the deal and pull out. After all the work that has gone into the deal to get to this point, to then fall on the second last hurdle is such a shame. So please, work towards setting realistic timeframes which can be met by your legal team.
Likewise, be mindful of using a contract overly onerous in its terms. Yes, all parties need to ensure they are protected by the contract, however unnecessary conditions are again likely to lead to time delays. You want the agreement to be practical which also means avoiding contentious terms that are likely to lead to disputes.
At times, vendors and purchasers need to heed the advice of their solicitors but then lead the contract stage of the process to a successful outcome by having their final requests implemented.