What I dealt with selling a medical practice to private equity

I took my practice, Surgical Associates Chartered, through a private-equity transaction. I am not going to share the price, the multiple, the structure or my tax result. They were specific to that deal and that moment, and any number from me would anchor you on something that has little to do with yours.

What I can share is how many separate decisions sit inside one sale, and that each belongs with a different professional. The buyer has done this many times; most physicians do it once. These are the questions I would bring to each of the three people you need on your side before you sign anything. Make sure each of them works for you, not for the buyer, and ask each how they are paid.

Questions for your CPA

• Is this an asset sale or a stock or equity sale, and how is each taxed for me?
• How is the purchase price allocated among goodwill, equipment, a non-compete and anything else, and what rate applies to each piece?
• Is any part of the price paid as rollover equity in the buyer, and is that rollover taxed now or deferred?
• How are earn-outs, holdbacks and escrows taxed, and in which year?
• What will I owe in federal and state tax, and when, and how much cash should I set aside for it?
• After the sale I will likely be an employee. How does my compensation change, and what happens to my retirement plan, including whether I can still use a Solo 401(k) for any outside income?

Questions for your healthcare attorney

• What does the non-compete cover: how long, how far, and what kinds of practice?
• What is the term of my employment agreement, how am I paid under it, and on what grounds can either side end it?
• Who controls clinical decisions, scheduling and staffing after closing, and how does the management-company structure work in my state?
• What rights does my rollover equity carry if the buyer is sold again: can I be forced to sell, can I join a sale, and when can I get liquidity?
• What am I personally promising in the representations and indemnities, how much of the price is held back, and for how long?
• Who pays for malpractice tail coverage, and what happens to my partners and staff?
• Has the deal been reviewed for federal and state healthcare regulations, such as Stark and anti-kickback rules?

Questions for a fiduciary financial adviser

• How much of the proceeds do I need liquid, and how much can stay tied up in rollover equity without putting my plans at risk?
• If my income drops after the sale, how do I replace it, and over what time frame?
• How concentrated am I in one company, and how should I think about the rollover as an illiquid, uncertain holding?
• What should I do with the money in the first year, before making any long-term commitments?

On that last point: a sale tends to bring offers, including from people like me. A good adviser will tell you there is no hurry, and I agree. Any investment, including the ones I am part of, should wait until your own team has looked at the whole picture.

This page describes questions, not answers. It is not legal, tax or financial advice, and every practice sale is different.