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Category: Business planning

  • Buying or selling a vet practice, part 4

    Buying or selling a vet practice, part 4

    Last time, we looked at some practical steps to be taken running up to completion (pre-closing) and completion itself. This week, we will look at some of the softer skills that may be required post-completion – particularly if you are a buyer or seller who has an ongoing retained role in the business.

    For the acquired business – and those involved in it (whether employees or sellers with a continuing role) – the period immediately following completion will inevitably result in change of some sort, and require a degree of adaptation.

    Business as usual

    If you are a seller with a continuing role, clear communication with employees, suppliers and customers to avoid undue worry and disruption to operations, along with reassurance it is “business as usual” (if your role permits that), will go a long way to ensuring a smooth transition.

    For the buyer, managing reactions to that change in a positive manner in the period immediately following completion will be key to the long-term success of the acquisition or merger.

    It’s often said the first 100 days following an acquisition or merger is the most critical period, during which time the confidence of staff should be won, customers contacted and reassured, and systems integrated.

    Hands on or off?

    Generally, if former management have a retained role in the business (even if only for a few months), the integration phase will, of course, be much easier.

    Otherwise, a hands-off approach from a buyer, without a physical presence within the business for the first few months, could have a negative effect on the business, from which it could be difficult to recover.

    Calendar.
    It’s often said the first 100 days following an acquisition or merger is the most critical period. Image © gazanfer / Adobe Stock

    Large consolidators will very likely have a well-tested integration plan, which can be rolled out, but others should carefully plan for integration in advance of completion.

    Given concerns customers might have following a sale, some integration plans of consolidators will involve not informing customers of the sale until some later.

    It can often be easier to allay fears of change when people realise the change occurred six months ago and they haven’t noticed any difference in service.

    Secret to your success

    In short – and this may sound cliché – but success comes down to the people in the business – particularly for a veterinary practice – and how they integrate in to the new model immediately post-completion could be what makes a transaction successful.

    As a final thought, two top tips to keep in mind include:

    • Buyers: have a plan prepared in advance of completion for the integration.
    • Sellers with an ongoing role: enjoy your new position as either an employee or consultant without the burden of being a business owner. Otherwise, enjoy retirement.
  • Buying or selling a vet practice, part 2

    Buying or selling a vet practice, part 2

    In part one of this blog topic, we looked at the first phase in the buying/selling process (pre-due diligence). In this post, we‘ll look at the next two stages – due diligence and deal documentation.

    Due diligence

    In essence, due diligence is the process where the potential buyer takes a very close look at the practice it is thinking of buying. It will be keen to make sure it is getting what it expects and that no nasty hidden surprises are lying in wait that will reduce the value of the business after completion of the purchase.

    The process itself is likely to involve the business owner’s advisors setting up a “data room” where the key information the buyer has asked to see is provided. These data rooms are now frequently online – essentially, file sharing sites.

    Compiling information for a data room can be a very time-consuming process, and the more organised the practice owner is, generally the easier this process will be.

    Usually during this process the owner doesn’t want too many employees knowing about a potential sale. This can impact the information gathering, often putting a greater burden on the owner.

    It is, therefore, usually worth considering bringing some key colleagues into the process to help ease that burden (it is only so often you can use the excuse “the auditors need the information”).

    Due diligence tips

    Some key points to bear in mind for a business owner during the due diligence phase are:

    • Always have robust confidentiality agreements in place with the buyer. But remember, if any sensitive, confidential information exists that could significantly disadvantage the business if the buyer doesn’t buy it, don’t disclose it to the buyer until you are happy a sale is very likely.
    • Don’t try to hide any “skeletons”. Trust is very important to buyers; if they think they can’t trust you, a real risk exists of the deal not proceeding or the due diligence becoming much more detailed and prolonged than it might otherwise have been.
    • Having clear lines of communication and responsibility mitigates the risk of detrimental issues and later potential disputes arising.
    • Know what you are passing across. If any “skeletons” exist, make sure you know you are passing across a “skeleton”.

    Documentation

    Assuming due diligence has progressed well, the buyer will then move to producing the first drafts of the main deal documents.

    Depending on timescales (and the buyer’s confidence it won’t uncover any nasty surprises) the documentation is often produced at an early stage in the due diligence process, so negotiation of the documents can take place while due diligence is ongoing.

    In most cases, it is going to be the buyer’s lawyer who produces most of the deal documents.

    Documentation tips

    Key points to bear in mind during the documentation phase are:

    • Don’t underestimate just how much documentation is required and how long it might take to agree. The main document is, of course, going to be the acquisition agreement, but ancillary documents (particularly those that rely on third party consent, such as banks, landlords or other funders) can play a very important role. Failing to address issues arising in relation to these documents can have a dramatic impact on the timetable.
    • If possible, you (and your advisors) should avoid negotiating key documents at the last minute – preparation and planning is critical to avoid this. A detailed timetable and responsibility list should be prepared – and adhered to wherever possible.
    • When appointing advisors, it is worthwhile asking them for a list of documents likely to be required. This will give you an idea of what is likely to be involved and may also indicate to you how experienced your advisor is in relation to disposals or acquisitions of businesses.