let’s make a deal buying and selling a practice. presented by denise robertson, mills & mills...
TRANSCRIPT
Let’s Make a DealBuying and Selling a Practice
Presented by Denise Robertson,Mills & Mills LLP•Denise joined Mills & Mills LLP as an Associate in
2005. Denise's practice is focused on private business, corporate and health law.
• In the health sector, Denise advises regulated health professionals and health care institutions including private practices, multi-disciplinary clinics and long-term care facilities. Much of Denise’s work is related to starting a practice, running a practice and buying or selling a practice.
AGENDA1. Overview of the Purchase and Sale 2. Step 1: Letter of Intent3. Step 2: Due Diligence4. Step 3: Agreement of Purchase and Sale5. Step 4: Employees6. Step 5: Associate Agreement and Training7. Step 6: Lease8. Step 7: Closing9. Step 8: Post Closing 10. Questions
Overview of the Purchase and Sale
Overview – Considerations for the Vendor
• Assets vs. Share sale• Purchase price and deposit amount• Will the Vendor stay on as an associate or to provide training?• Lease assignment or new lease and what fees will be owing to
the Landlord• Employees and termination• Conditions – in what ways might the Purchaser be able to get
out of the deal?
Overview – Considerations for the Purchaser
• Who are the parties?• Asset vs. Share sale• Purchase price and deposit• What conditions will you be required to fulfill in order to close
the deal?
Overview – Considerations for the Purchaser
• Restrictive covenants – non-competition and non-solicitation provisions for the vendor
• What are the implications of taking on employees?• What are the obligations under the Lease? Will a personal
guarantee be required?• Will you receive any training?
Step 1: Letter of Intent
Step 1: Letter of Intent
• What is it and why do I need one?▫A non-binding letter that outlines some of the key terms
upon which the purchaser will buy and the vendor will sell the chiropractic practice.
▫The only parts that may be binding are the confidentiality, exclusivity, and deposit provisions.
Step 1: Letter of Intent
• Key terms to include:▫Who is buying / selling?▫What is being bought?▫What is the purchase price?▫Will there be a deposit and if so, how much and in what
circumstances will it be returned?
Step 1: Letter of Intent
• Key terms to include:▫What will happen with the employees before and / or after
the closing?▫ Is there an existing lease and if so, will a new lease be
entered into or will the existing lease be assigned?▫How long will the due diligence period last?
Step 1: Letter of Intent
• Key terms to include:▫What conditions will the vendor and the purchaser require
in order to complete the transaction?▫How long will exclusivity period go for?▫Other issues may be addressed as well (e.g. excluded
assets, treatment of accounts receivable, etc.)
Step 2: Due Diligence
Step 2: Due Diligence
• What is it and who does it?▫Once the Letter of Intent is signed the purchaser begins the
due diligence process which involves document review and searches in order to ensure the purchaser is buying what it thinks it is buying
▫ In addition to conducting its own due diligence, the purchaser relies on its professional advisors (i.e. accountant and lawyer) to review documentation and financial records of the vendor
▫The vendor’s obligation is to provide full access to the practice to the purchaser and provide copies of any requested documentation
Step 2: Due Diligence
• Due diligence is typically done at the same time as the purchaser is obtaining financing and at the same time as the purchaser and vendor are negotiating the agreement of purchase
• Due diligence involves:▫ Chart audit and review▫ Equipment inspection▫ Financial review▫ Lease review if there is a lease▫ Review of employment, associate, supplier and other business
agreements▫ Searches
Step 2: Due Diligence
• What happens if the purchaser discovers an error, discrepancy or misrepresentation by the vendor?
• How much due diligence is required?
Step 2: Due Diligence
• Purchaser must be satisfied. Observing a practice for a few days is likely not enough
• Ask questions like:▫Are the fees charged reasonable or too low?▫Does equipment need upgrading?▫Are the patients the type you would like to attract?▫Are the staff trained to the level you expect?
Step 3: Agreement of Purchase and Sale
Step 3: Agreement of Purchase and Sale
• How is it different from the Letter of Intent?
• Why is it important to the purchaser?
• Why is it important to the vendor?
Step 3: Agreement of Purchase and Sale
• The Agreement of Purchase and Sale includes:1. Parties and form of agreement2. Recitals and background to the agreement3. Definitions4. Purchase price and list of assets or shares being purchased5. Closing provisions – where, when and how?
Step 3: Agreement of Purchase and Sale
• The Agreement of Purchase and Sale includes:6. Employees and associates7. Accounts receivable8. Representations and warranties of the vendor9. Representations and warranties of the purchaser10. Indemnification
Step 3: Agreement of Purchase and Sale
• The Agreement of Purchase and Sale includes:11. Covenants of the vendor 12. Conditions in favour of the purchaser13. Conditions in favour of the vendor14. General terms and signatures15. Schedules
Step 3: Agreement of Purchase and Sale
• If you are selling or buying shares, the Agreement is slightly different as there will be additional representations and warranties and additional requirements for closing
Step 4: Employees
Step 4: Employees
• What happens to the employees on the sale of the practice?
• As a part of the due diligence, the purchaser reviews a summary of the employees’ status including compensation, length of employment, benefits and responsibilities
Step 4: Employees
• Are you a successor employer? Even if the purchaser buys assets rather than shares, the purchaser will be deemed to be a successor employer by section 9(1) of the Ontario Employment Standards Act:
“9. (1) If an employer sells a business or a part of a business and the purchaser employs an employee of the seller, the employment of the employee shall be deemed not to have been terminated or severed for the purposes of this Act and his or her employment with the seller shall be deemed to have been employment with the purchaser for the purpose of any subsequent calculation of the employee’s length or period of employment.”
Step 5: Associate Agreement and Training
Step 5: Associate Agreement and Training
• Will the vendor become an associate of the purchaser?▫ The vendor may stay on with the practice as an associate in
order to assist with transition of the patients and training. While the Agreement of Purchase and Sale should cover the details of this arrangement, a separate associate agreement may be required in certain circumstances
Step 6: Lease
Step 6: Lease
• Careful review of the lease during due diligence is crucial. In particular, look for the lease assignment or transfer provisions▫When a tenant sells all of its shares or assets it is generally
deemed to be a “transfer” under a lease and prior consent of the landlord is required
Step 6: Lease
• Prior consent from the landlord is often based on the landlord’s approval of the purchaser’s creditworthiness, financial net worth and background
• Landlords may require a personal guarantee from the purchaser
• Some leases require a fee to be paid to the Landlord if there is a transfer – vendors need to be aware of any fees prior to negotiating the sale of the practice as it could impact the purchase price
Step 6: Lease
• What is the term of the lease? • What are the tenants rights on renewal?
Step 7: Closing
Step 7: Closing
• Once all of the steps above are completed and the conditions have been met or waived, the purchaser and vendor will meet to sign all of the closing documents and exchange funds/keys
• Congratulations the deal is done! The purchaser is now the owner of the chiropractic practice
Step 8: Post-Closing
Step 8: Post-Closing
• Once the deal is closed, there are a number of additional steps the purchaser and often the vendor will take including:▫Formal announcement▫Notify the College of Chiropractors of Ontario and the
Ontario Chiropractic Association▫Update your corporate, business and tax records▫Meeting with patients, employees and suppliers▫Completing any agreed training
Thank you!
The information contained in this presentation is of a general nature and cannot be relied upon as legal advice.
For legal assistance, contact Denise Robertson at 416-682-7139, or [email protected].
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