The first step is obviously finding a practice for sale that is well suited for you; that includes the location and size of practice, the seller’s demand for purchase price, and your over all goal and objectives. Once a suitable seller is found, the process starts with sending a letter of intent to the seller or the seller’s agent which expresses your interest in purchasing the practice. The letter of intent should include both binding and non-binding provisions. Generally speaking, the non-binding parts of a letter of intent include the business terms such as the structure of the deal, whether you are interested in buying the stocks or assets of the practice, the purchase price, any offers of employment, etc. Until and unless you are satisfied with the business records, tax returns, the legal due diligence, and other matters, you should not make a firm offer to purchase the practice. Throughout my practice I have been surprised by potential clients that contacted me after having sent a letter of intent themselves, without the input of an attorney, believing that anything and everything in their letters are non-binding only because the letter states it is a letter of intent. A letter and its terms do not automatically become non-binding only because a letter states it is a letter of intent and a seller may be able to force you to follow through and purchase the practice based on a letter of intent that does not specify it is non-binding. The binding terms usually include a “no-shop” provision by the seller and non-disclosure agreements (NDAs) that protect the confidentiality of the seller, the buyer, and the information and documents that are exchanged by the parties.
After forwarding a letter of intent, the seller usually makes the necessary disclosures that would give the buyer a window into many aspects of the practice so that the buyer can determine the terms that s/he is willing to offer to the seller. These transactions normally include intricate negotiations over many weeks and sometimes months regarding the business and legal terms that will affect both the buyers and sellers for years to come. These negotiations are usually done by exchanging offers and counter-offers in form of elaborate contracts until both parties feel comfortable signing the contract. Your attorney should conduct and complete business and legal due diligence that may differ in scope; the risks involved and the cost of completing such due diligence and your comfort level on accepting the risk are some of the factors in deciding to pursue a certain line of inquiry. Once due diligence is satisfactorily completed, the parties will proceed to the Closing.
