How Long Does It Take to Buy a Dermatology Practice?
Buying a dermatology practice is a process that can take several weeks or months depending on the transaction, financing, due diligence, negotiations, and other factors. There is no fixed timeline for every acquisition.
For physicians considering dermatology practice financing, understanding the typical stages of an acquisition can help buyers plan ahead and avoid unnecessary delays.
Finding the Right Practice
The process begins with identifying a practice that fits the physician’s goals.
Buyers may evaluate location, specialty mix, patient base, revenue, profitability, services, equipment, staffing, and growth opportunities before deciding whether to pursue an acquisition.
Initial Discussions With the Seller
Once a potential practice is identified, the physician may begin discussions with the seller.
The parties may discuss the asking price, transaction structure, transition plans, real estate, equipment, and other important aspects of the proposed sale.
Letter of Intent
A letter of intent can outline the basic terms of a proposed transaction.
Depending on the situation, it may address the purchase price, assets being acquired, transition arrangements, exclusivity, and other preliminary terms.
Due Diligence
Due diligence is one of the most important stages of the acquisition.
The buyer may review:
- Financial statements
- Tax returns
- Accounts receivable
- Patient information
- Equipment
- Staffing
- Lease agreements
- Contracts
- Other business records
The amount of information involved can significantly affect the timeline.
Practice Valuation
A valuation may be completed as part of the acquisition process.
The valuation can help the physician assess whether the proposed purchase price is reasonable based on the practice’s financial performance, assets, patient base, and other factors.
Arranging Financing
If financing is required, the physician will need to work with a lender or financing professional.
The lender may review the buyer’s financial profile, the practice’s financial performance, the purchase agreement, and other information before approving the financing.
Loan Underwriting
The underwriting process can involve reviewing financial statements, tax returns, credit information, business information, and transaction documents.
Requests for additional documentation can extend the timeline, so responding quickly can help keep the process moving.
Negotiating the Purchase Agreement
The final purchase agreement generally contains much more detail than the initial letter of intent.
The buyer and seller may negotiate representations, warranties, assets included in the transaction, transition services, liabilities, and other terms.
Licensing and Credentialing
Depending on the transaction, the physician may need to complete licensing, credentialing, payer enrollment, or other administrative requirements.
These processes can involve outside organizations and therefore may not be completely within the buyer’s control.
Lease and Real Estate Considerations
If the practice leases its location, the lease may need to be assigned or renegotiated.
If real estate is included in the transaction, additional property-related due diligence and financing may be required.
These factors can add time to the closing process.
Equipment Review
Equipment should be reviewed before the transaction is finalized.
A buyer may need to determine whether equipment is owned, leased, financed, or subject to other obligations.
Closing the Transaction
Once due diligence, financing, documentation, and other requirements are complete, the transaction can move toward closing.
At closing, ownership of the practice and the assets included in the transaction can transfer according to the purchase agreement.
What Can Cause Delays?
Several issues can extend the acquisition timeline.
These can include:
- Incomplete financial records
- Complicated ownership structures
- Financing delays
- Lease issues
- Equipment liens
- Credentialing requirements
- Purchase agreement negotiations
- Unexpected due diligence findings
Prepare Documents Early
Physicians can potentially reduce delays by organizing their financial and professional documentation early.
Having tax returns, financial statements, personal financial information, and other commonly requested documents available can make it easier to respond to lender and professional requests.
Plan for the Transition
The acquisition does not necessarily end when the purchase closes.
The physician should also plan for the transition of patients, employees, vendors, technology, billing, scheduling, and other operations.
A detailed transition plan can help maintain continuity after the change in ownership.
Final Thought
The timeline for buying a dermatology practice depends on the complexity of the transaction and the time required for negotiations, due diligence, financing, documentation, credentialing, and closing.
Physicians can help keep the process moving by identifying the right practice, preparing financial documents early, responding quickly to information requests, and working with qualified professionals throughout the transaction.
