Navigating the acquisition process is an important part of the process for both sides when buying or selling a company. Private Practice Transitions is here to sort things out by explaining four types of acquisition agreements for private practices. These methods are beneficial to the buyer and seller and can explain the transfer of power from one side to another.
1. Merger Agreements
A merger involves the absorption of one practice into another, where the acquiring practice takes on all assets and liabilities of the target practice. The two main types of mergers are direct and indirect mergers. In a direct merger, the acquiring practice buys the target practice, fully integrating it into its operations.
Indirect mergers involve creating a wholly-owned subsidiary by the buyer, which then merges with the target practice. This structure can protect the buyer from certain liabilities of the target practice. In both cases, the target practice ceases to exist as an independent entity.
2. Asset Acquisition Agreements
In an asset acquisition, the buyer purchases assets of the target practice, such as equipment, patient lists, or intellectual property, rather than the entire practice. This type of agreement allows the buyer to select only the assets they need, potentially reducing risks associated with unknown liabilities.
For instance, a buyer may acquire a division of a practice with a reputation for having cutting-edge medical technology while leaving behind other parts of the business. Asset acquisitions can provide significant tax advantages, as the buyer can depreciate the assets over time.
3. Stock Acquisition Agreements
Another type of acquisition agreement for private practices involves buying and selling stocks. Stock acquisitions include purchasing the majority of the target practice’s shares directly from the owners. This gives the buyer complete control over the target practice’s assets and liabilities. Unlike mergers, the target practice retains its identity and continues operating as a subsidiary of the acquiring practice.
This type of agreement is useful when dealing with shareholders, as it simplifies the transfer of ownership. Stock acquisitions allow the buyer to gain control without disrupting the target practice’s existing structure.
4. Partnership Buyout Agreements
Partnership buyouts occur when one partner buys out another partner’s interest in the practice. This type of agreement is common in practices where multiple professionals share ownership and management responsibilities. You can structure this buyout as a gradual acquisition of shares or in a single, lump-sum purchase.
Are you considering selling your private practice? Partnering with an experienced broker to sell a business can help you navigate the complexities of the acquisition process. At Private Practice Transitions, we specialize in tailoring our services to meet your unique needs, ensuring a seamless transition while maximizing your practice’s value. Contact us today for a consultation, and take the first step toward a successful future!
