Tuesday, June 26, 2012

Dentist Using Dual Representation for Practice Purchase

I wanted to get a head start at locating a practice to buy before my NHSC obligation is up which is on January 1, 2013.  The good news is that I found one. It's been on the market for about a year.  I have a broker but I feel as if he is rushing me to purchase this practice.  ...

He's really not working for the both of us at the same time (dual agent). He has confidentiality on both sides. He is in the middle, he has to try to be fair for both sides.

And he just called me saying that the owner will stay for 6 months but at 40% collections instead of what we initially talked about (35%) working 2 days a week.

I'm trying to reconcile what all these statements mean, so maybe you can help clarify:

How did you find the practice, through this broker or did you happen to stumble upon it?

Through the broker 

Is the seller using a broker? 

The broker is a dual agent; he represents the both of us. I do realize that this is not an ideal situation but I can't buy this particular practice with a different broker because the one I have is who introduced it to me.  

Is this the broker you're speaking of in these posts? 

Yes.

 Who is paying the broker?

 Both seller and buyer are paying the broker 

How are they getting paid? From proceeds of the settlement? 

 Yes

 Ahead of time like a consultant? 

No

When you say "we" initially talked about 35%, who is "we"?

The broker mentioned it based on the seller staying for 90 days.

You and seller or you and broker or all three of you? If you can answer these questions we'll know what arrangement is.

Ok, so we now know it's a dual representative broker and more than likely they will favor the seller. The fact that they said 35% then changed to 40% gives you a clue I hope.

 Does this give me any money to pay the business loan is my concern ...

How are you going to address that concern? Are you going to run the projections to answer that? Is that what the broker is doing?

The accountant, I'm paying him to make sure it works.

So hold off on making an offer until I meet with the lender?

So it sounds like you're ready to make an offer, I assume you've done a price and practice performance assessment (or someone looking out for you) to determine that your offering price is "reasonable", right? 

The accountant will do that. I was provided with a proforma by the broker and the accountant will look it over along with the tax returns

Great, so you do have advisors. Follow their counsel and one suggestion, if the broker wants you to incur a penalty to break your existing contract it may be something to consider as long as you factor that into your offer for the practice. When you offer a lower number than expected and the broker wants to know why, simply tell them that you're going to take their advice and incur that additional cost and therefore, you view it as part of the purchase price. Tell them that it's not coming out of your pocket; it's either coming from the seller or the broker.

Remember...it's a negotiation!


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