A merger and acquisition (M&A) transaction is a process where one company purchases and merges with another company.  For medical practice owners, this type of transaction can be done to achieve strategic and financial objectives, and typically involves the transfer of ownership, control, and assets of one company to another. Though this transaction is done with benefits in mind, there are a few things every practice owner should know when negotiating this sort of transaction to make sure it's the right fit.
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Understand the value of the business‍

A business valuation refers to the process of determining the economic value of an asset, company, or investment. In the context of a merger or acquisition, the valuation is typically used to determine the price that the acquiring company is willing to pay for the target company. A thorough business valuation analysis will take into account a variety of factors, such as the company’s financial performance, market position, growth potential, and the value of assets and liabilities. It can also help you determine the fair market value of a practice, identify key value drivers, and help you determine the amount of debt or equity required for the transaction.
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Conduct thorough due diligence

As with any transaction, you’ll want to conduct a thorough due diligence process to identify potential risks, liabilities, or issues that could impact the transaction. As a practice owner, it's important to conduct thorough due diligence on the acquiring company to ensure that they are a good fit for your business and that the transaction is in your best interests. This could include evaluating the financial and operational performance of the acquiring company, reviewing their legal and regulatory compliance, and assessing their cultural fit with your business.

When negotiating any sort of transaction for your practice, you want to be sure that the company you’re doing business with aligns well with your own, so conducting thorough due diligence can help you avoid any potential risks or issues in future business dealings.
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Plan a smooth deal structure and post-transaction‍

Planning is a critical aspect of negotiating any business transaction, particularly in the context of mergers and acquisitions. Planning out your deal structure not only prepares you to discuss risks and opportunities, but it can also help you plan out negotiation strategies. It is extremely impactful to work alongside an experienced Healthcare Banker, CPA or other financial advisors when planning, as they can help identify potential trade-offs, develop fallback positions, and determine an overall successful strategy for your practice.

The post-transaction structure for a medical practice will depend on various factors, which makes it another vital time to work with your Healthcare Banker or other financial advisors so they can guide your next steps. Some common post-transaction structures for medical practices include consolidation, integration, affiliation, or joint venture. These all depend on the goal of the transaction and the level of the merger and acquisition between the two practices. Overall, it is an important piece of the negotiation process, as it is how the two practices will function with employees, facilities, and resources in the future.

In the end, M&A transactions can provide numerous benefits, however, they can also be complex. Proper planning and overall preparedness is integral in negotiating the right transaction to set your medical practice up for success.

Firstrust works hard to get the best possible deal for you and your medical practice. Get in contact with a Healthcare Banker or a Relationship Manager at Firstrust and start planning the future of your business knowing it’s in good hands.

For more information please visit our healthcare practice solutions page.