Preparing for a Healthcare Transaction Sale
Preparing for a Healthcare Transaction Sale – Member, Laura D. Fent
As you prepare for a Healthcare Transaction Sale, there are many things to keep in mind to ensure a smooth transaction for both parties.
The sales process starts with negotiating a letter of intent in which the parties agree to the basic economic and business terms of the sale. Due diligence of the seller’s business then commences and continues during the negotiation of the purchase agreement. Closing occurs when the buyer is satisfied with its due diligence review and the parties have agreed to the terms of the purchase agreement. Preparation for a sale should commence well in advance of the start of this process. On sell-side, the two most neglected steps in preparing for a sale, and the ones most likely to maximize the sales price, achieve desired outcomes, and minimize legal fees, are:
1. Not Properly Negotiating the Letter of Intent
A seller’s negotiating leverage is highest immediately prior to execution of the letter of intent. Because of this dynamic, the seller’s best shot at achieving its desired outcomes is to negotiate all deal points desired by seller in the letter of intent. Also, agreeing to most of the economic and business concepts at the letter of intent stage will help minimize the amount of time spent negotiating the purchase agreement, thus reducing transaction costs and freeing seller’s time to concentrate on big picture strategy and managing the due diligence process.
2. Get your Compliance House in Order
Holes in the seller’s compliance plan and implementation can lead to lower transaction valuation or worse – no deal at all. It also increases the cost of a transaction to address compliance issues with regulators while simultaneously disclosing them to the buyer during due diligence. Third-party scrutiny from a buyer is not ideal in a situation in which the maintenance of attorney-client privilege may be important. A health care provider wanting to sell should make sure that it has up-to-date federal and state privacy, self-referral, anti-kickback, and billing compliance plans and that it implements and administers those plans as well as it can before embarking upon the sales process.
Our team of attorneys are well versed in areas of Healthcare Business Transactions. If you’re preparing for a healthcare transaction sale and have additional questions, contact us at 316.267.2000.