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By Simon Palmer and Julian Whitehead
The stakes are high in veterinary practice sale transactions. You are possibly selling a practice with clients of long standing, who you have nurtured for many years, or you are purchasing a practice which you hope will provide the best opportunity for you, so that you can enhance its potential and your income, in your own comfort zone.
Financially, a practice usually sells for amounts in the hundreds of thousands or millions of dollars. There are also important non-financial qualitative aspects of the deal, like transferring staff, client relationships and a reputation that has been built over decades, and post-sale work commitments for the vendor that can last from 6 months to 5 years.
The transaction itself is usually documented with three or four legal contracts:
1. A business sale agreement,
2. A premises lease contract or premises sale contract,
3. A work contract for the vendor post sale, and
4. A partnership/associateship agreement if there are equity partners/associates.
With all of this at stake, you would think that a buyer or vendor would want to make sure they have appropriate legal representation to ensure they receive what has been promised to them and to protect themselves from future risks.
Unfortunately, that isn’t how the selection process seems to go for many in the veterinary industry. Regularly:
These are all approaches that will probably get the job done for a seller or a buyer… But…
A friend or family member lawyer will sometimes over-service a client who they feel indebted to, trying to win points by pushing for creative, unprecedented conditions.
A friend or family member lawyer will sometimes under-service a client, because they aren’t getting paid properly and begrudge having to do the work cheaply (or for free) out of familial obligation.
A lawyer unfamiliar with commercial law will not have the same eye for commercial risk and experience with clauses that would help their client.
A lawyer unfamiliar with veterinary practice sales is prone to producing inappropriate contracts and often struggles with due diligence compliance, thereby missing industry norms and risks facing their client, and the legal protection that their clients need.
Veterinary practices are idiosyncratic. Acting in a veterinary practice transaction is not necessarily the same as acting in the sale of a beauty salon, café or a multi-naitonal corporation!
If a veterinarian needed surgery on their hand, would they try to do it themselves?
If your GP cousin offered to do it on the cheap, would you take them up on it?
Would you go to a foot surgeon for an ear, nose or throat problem?
Most people would recognise that the best way to select assistance for a complex task is to ask someone qualified to do it. And even better, is someone who has done that complex task 100+ times before, because they will likely do a better job than someone who has trained for a different task and is doing it for the first time.
What this means, as far as a veterinary practice sale is concerned, is that the legal advisor you choose should specialise in commercial transactions rather than areas such as immigration law or residential conveyancing. Ideally, they will also have experience in the veterinary industry. This allows them to understand the operational realities of practice ownership, industry risks, accepted norms and the areas where problems commonly arise. This industry-specific understanding helps ensure their client is protected from liabilities and issues unique to veterinary practice transactions.
Ultimately, the right legal advisor should provide more than technical legal expertise. They should offer confidence that the transaction is being managed appropriately, that potential risks have been identified and addressed, and that your interests are protected throughout the process. In short, they should give you peace of mind.
This might seem like self-serving advice, being that one of the authors of this article is a lawyer who has a practice that specialises in practice sales. It is self-serving, but not in the way that you think. The primary aim of this article isn’t to drum up more clients. It is to ensure that the transactions of the clients who have already engaged either author are able to be completed as efficiently as possible – this becomes difficult if the other side is combative, unfamiliar with the operational side of veterinary practices and is asking for uncommercial terms which can derail the deal. To play a game of tennis it relies on people on both sides of the net knowing what they are doing.
Co-author, Julian Whitehead, is a senior associate at Whitehead Legal, which provides services exclusively to health care professionals. He can be contacted at julian@whiteheadlegal.com.au
Simon Palmer is the Founder and Managing Director of Practice Sale Search, Australia’s leading vet practice brokerage. With more than 20 years’ experience in practice sales, Simon has extensive knowledge of and insight into the vet industry. He is a licensed business broker and real estate agent. His company, Practice Sale Search, sells over 100 dental and vet practices every year. Simon is a regular contributor to major Australasian vet publications, and presents seminars on Exit Planning which are essential for any veterinarian thinking of selling their practice with the next 5 years.
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The dream of owning your own veterinary clinic hasn't disappeared. The path to getting there has changed. There’s a conversation we hear constantly in this industry. It happens in the car park after a long shift, or over a wine at a conference. Someone sighs: “Ah, one...
