The Purchase Process
Typical Steps in Buying Process:
The prospective Buyer will call or register online with Alliance Accounting Sales and will need to sign a non-disclosure form to view our Practices For Sale page.
A representative from Alliance will talk to the Buyer to determine what type and size of ﬁrm he/ she are looking for. Even if Alliance does not have a practice that matches the Buyerʼs objectives, we can solicit ﬁrms in our database that may have an interest in selling their practice in the near future.
If the potential Buyer wishes to pursue a speciﬁc ﬁrm we have listed, Alliance will require the following from the Buyer:
- A signed non-disclosure & conﬁdentiality agreement
- A summary personal ﬁnancial statement
After the above agreements have been signed, Alliance will:
- Discuss the qualiﬁcations of the potential Buyer with the Seller
If the Seller believes the potential Buyer is a serious Buyer and a good match for his/her practice, Alliance will coordinate an introductory meeting with the Buyer and Seller. Alliance will make every effort to have a representative at the introductory meeting.
If the Seller and Buyer wish to pursue the transaction, the Buyer will submit a non-binding Letter of Intent that includes a refundable deposit. The Letter of Intent(along with Letter of Intents from other potential Buyers) will be reviewed by the Seller. The Seller (through Alliance) may ask for adjustments or clariﬁcations to the Letter of Intent.
The Letter of Intent will normally include:
- Assets to be Sold
- Down Payment
Timing of Transaction
- Assumption of Lease (if applicable)
- Retention of Employees (if applicable)
If the Buyerʼs Letter of Intent is accepted, the potential Buyer will put a small deposit down (as set forth on the Letter of Intent) and will generally have several weeks to perform due diligence on the Sellerʼs books.
Due diligence typically involves reviewing the following documents:
Client Lists and Billings (without client names)
To verify $ per service and $ per client statistics
- A sample of client ﬁles and work papers (to review the Sellerʼs organization and competence)
- To review the Sellerʼs organization and competence
• Bank Statements (to verify cash sales ties to ﬁnancial statements)
Tax Returns for past three years
- Revenue by Service, By Month, By Year
Fees Itemized By Service
Payroll records if the practice has employees
Listing of ﬁxed assets that are to be purchased with the practice
Owners Income & Perks
Seller Discretionary Earnings calculation
Concurrent with performing due diligence, the Sellerʼs attorney is preparing a Purchase Agreement for the Practice.
The Purchase Agreement generally includes:
• Speciﬁes assets acquired and liabilities assumed
• Client ﬁles purchased (not listed until Close)
• Procedures for Closing
• Representation and Warranties of Seller
• Representation and Warranties of Buyer
• Restrictive Covenants Required
• Employment and Consulting Agreements Required
• Contingencies to be completed prior to close
• Other Closing Documents (State speciﬁc)
Concurrent with due diligence and the drafting of the Purchase Agreement, the Buyer will need to line up ﬁnancing. Alliance will work with the Buyer to obtain ﬁnancing. Alliance will put together a loan package that analyzes and organizes the entire transaction for the lending institution so that the Buyer will receive a timely response to the Buyerʼs loan application.
Once all of the above steps have been completed, legal documents are prepared and the parties are ready close on the sale of the practice.
Typical legal documents include:
- Purchase Agreement (see above)
- UCC ﬁlings
- Employment Agreements
- Non-Compete Agreements
- Promissory Note (if Seller Financed)
- Security Agreement (if Seller Financed)
- Corporate Resolution
- Bill of Sale
- Assignment of Client Files
- Work In Progress/Receivables
- Lease Assignments
- Assignment of Other Agreements
- Close of Transaction
- Agreements are signed and checks are issued
This is one of the most important aspects of the transaction, yet it is often overlooked until after closing. Critical issues regarding the buyersʼ and sellersʼ responsibilities on a day-to-day basis must be addressed such as:
Client retention – Methods of assuring maximum client retention.
The Seller and Buyer should have a common message to the clients as to why the practice was sold and that the change will, for example, actually be positive for clients because of added services, etc.
Sellerʼs responsibilities in the transition – If the owner stays on during the transition, his/her responsibilities must be clear to both parties.
Billable vs. non-billable compensation
Authority for the administration of the ofﬁce, etc.
- Accounts Receivable and Work in Progress issues
Administration of the ofﬁce
- Issues such as phones, e-mail, advertising, mailings…
- Employee retention
If staff is staying with the practice, the new owner should meet with each employee to understand the employees’ role with the ﬁrm and discuss the ﬁrmʼs strategy going forward.
Other Transition issues
Alliance will work with the Seller and Buyer (on an hourly basis) on post-close, transition issues.