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You’ve marketed your veterinary practice, navigated the negotiations, and finally signed a Heads of Agreement (HOA) or Term Sheet with a buyer. It is a moment worth celebrating, but it is not the finish line.
Before the champagne is popped and the final contracts are signed, you must navigate the most rigorous phase of the business sale lifecycle, Due Diligence (DD).
Suddenly, lawyers, accountants, and corporate acquisition teams are scrutinising every dollar, every employment contract, and every corner of your clinic. However, understanding what to expect and preparing for it in advance can transform due diligence from a stressful ordeal into a smooth transition.
The buyer’s primary goal during financial DD is to verify that the practice makes the money you claim it makes, and that those earnings are sustainable.
Normalising EBITDA: Buyers (especially corporate aggregators) will forensically review your Profit & Loss statements from the last three to five years. They will “add back” personal expenses, one-off purchases, and adjust owner-operator wages to market rates to determine the true EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation).
Revenue Trends: They will look closely at your revenue streams. Are consult numbers stable? Are you heavily reliant on a single clinician for the bulk of your surgical revenue?
Wage Ratios: A key metric buyers look for is your wages-to-revenue ratio. For a sustainable vet clinic, buyers typically want to see salary and wages sitting between 25% and 35% of total revenue.
Legal due diligence is where many deals get delayed. Buyers want to ensure they are acquiring an asset, not a hidden liability.
The Premises Lease: This is arguably the biggest hurdle in veterinary practice sales. Buyers generally require a long-term lease to secure the goodwill of the business, typically a minimum of 5 years remaining, ideally with options extending to 10 years. The buyer’s legal team will scrutinise your current lease, make good clauses, and the process for assigning the lease to the new entity.
Employee Contracts: Expect a full audit of your HR files. Buyers will check that all staff have up-to-date, legally compliant employment contracts. They will review accrued leave liabilities (annual and long service), as these will need to be adjusted in the final purchase price.
Compliance & Licenses: They will verify your radiation licenses for X-ray equipment, dangerous drugs registers, and local council permits.
The buyer needs to know how the practice functions on a day-to-day basis and what immediate capital investments might be required post-settlement.
Equipment and Assets: Expect a physical inspection of your clinic. If your ultrasound is ancient or your dental X-ray is broken, the buyer may try to renegotiate the price to account for immediate replacement costs.
Practice Management Systems: Buyers will want to look at your database. They will assess your active client numbers, reminder systems, and how easily your current software (e.g., RxWorks, ezyVet) can be integrated into their own network if they are a corporate aggregator.
Culture and Transition: While harder to quantify on a spreadsheet, corporate buyers are highly focused on staff culture. High staff turnover is a major red flag. They will want to understand the clinical philosophy of the team to gauge how smooth the post-sale integration will be.
The single best piece of advice for surviving due diligence is preparation.
Do not wait for the buyer to request documents. Work with your broker and accountant months in advance to build a secure “Data Room” containing all your clean financials, current lease documents, equipment lists, and staff contracts. When a buyer asks a question, having the documentation ready to go immediately demonstrates that your practice is well-run, building the buyer’s confidence and keeping the deal’s momentum moving forward.
A successful exit requires strategy long before the final handshake. At RWC Business Sales, we work with veterinary owners to pre-audit their practices, identifying and fixing potential DD red flags before a buyer ever sees them.
Contact our team today for a confidential discussion about preparing your clinic for a seamless, maximum value sale.
Peter is an experienced business executive in the mergers and acquisitions space who has been the primary founder of two successful national dental aggregation entities. With extensive experience in both dental and health related organisations. Peter knows how to create and utilise innovative tools and mechanisms to promote and foster growth and generate optimal outcomes.
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