What Documents Are Needed to Buy a Veterinary Practice?
Buying a veterinary practice requires a substantial amount of financial and business information. Reviewing the right documents helps a prospective buyer understand the practice’s financial performance, operations, assets, liabilities, and overall condition before completing an acquisition.
For veterinarians considering veterinary practice financing, having these documents organized can also help prepare for the financing and due diligence process.
Business Tax Returns
Several years of business tax returns can help show the practice’s historical revenue, expenses, and taxable income.
They can also provide information that can be compared with the practice’s other financial records.
Profit and Loss Statements
Profit and loss statements provide a more detailed view of the practice’s revenue and operating expenses.
Buyers can use them to evaluate trends in profitability over time.
Balance Sheets
Balance sheets provide information about the practice’s assets, liabilities, and equity.
They can help a buyer understand the financial position of the business at a particular point in time.
Accounts Receivable Reports
Accounts receivable reports show money that is owed to the practice.
Buyers should understand the age of outstanding balances and the practice’s historical collection patterns.
Bank Statements
Bank statements can provide another source for reviewing actual cash activity.
They may be useful when comparing deposits and withdrawals with reported financial information.
Production and Collection Reports
Veterinary practices may maintain production and collection reports showing activity by provider or service.
These reports can help buyers understand where revenue is being generated.
Patient and Client Information
Information about the practice’s client and patient base can help a buyer evaluate the stability of the business.
The appropriate information and manner of transferring records should comply with applicable privacy and professional requirements.
Equipment List
A detailed equipment list can show what assets are included in the transaction.
The list should identify major equipment and, where available, information such as purchase dates, ownership status, financing, and maintenance records.
Equipment Financing Documents
If equipment is financed or leased, buyers should review the associated agreements.
Understanding outstanding balances and contractual obligations can help clarify the financial structure of the transaction.
Inventory Records
Inventory records can show medications, supplies, food, and other products maintained by the practice.
Buyers should understand what inventory is included in the purchase and how it will be valued.
Real Estate Documents
If the practice owns its facility, documents related to the property should be reviewed.
These may include the purchase agreement, property information, mortgage documents, and other relevant records.
Lease Agreement
If the practice rents its facility, the current lease should be carefully reviewed.
Important terms can include rent, renewal options, expiration dates, assignment provisions, and other obligations.
Employee Information
Buyers should understand the practice’s staffing structure.
Relevant information may include employee positions, compensation, benefits, tenure, and employment agreements where applicable.
Employment Agreements
Some veterinarians, managers, or other employees may have formal employment agreements.
These agreements should be reviewed to understand existing obligations and transition requirements.
Vendor Contracts
Vendor agreements can include contracts for medical supplies, equipment, software, waste disposal, cleaning, maintenance, and other services.
Understanding these contracts can help identify ongoing obligations after the acquisition.
Insurance Policies
The buyer should review the practice’s existing insurance coverage.
This can help identify current policies and provide information that may be useful when arranging coverage after the ownership transition.
Licenses and Permits
Veterinary practices operate under professional and business requirements that vary by jurisdiction.
Relevant licenses, permits, registrations, and certifications should be reviewed before closing.
Legal Documents
Buyers should identify pending or historical legal matters involving the practice when applicable.
This can include litigation, disputes, contracts, regulatory matters, or other obligations that could affect the transaction.
Business Entity Documents
Information about the legal structure of the practice should be reviewed.
Depending on the transaction, relevant documents may include organizational records, ownership information, and other business formation documents.
Debt Obligations
The buyer should identify outstanding business loans, credit lines, equipment financing, leases, and other debt.
These obligations can affect the transaction structure and should be addressed before closing.
Financial Projections
Buyers may also prepare financial projections showing expected revenue, expenses, cash flow, and debt payments after the acquisition.
These projections can help evaluate whether the proposed transaction makes financial sense.
Seller’s Disclosures
The seller may provide additional information about the practice’s operations, assets, liabilities, employees, contracts, and other matters.
The exact disclosures will depend on the transaction and legal agreements.
Organizing Documents Early
Waiting until late in the acquisition process to collect documentation can create unnecessary delays.
Buyers can benefit from creating a due diligence checklist and organizing requested documents as early as possible.
Final Thought
Buying a veterinary practice requires careful review of financial, operational, legal, and business information. Tax returns, financial statements, accounts receivable, equipment records, leases, employee information, contracts, licenses, and debt documents can all play an important role in the due diligence process.
Organizing these documents early can make it easier for the buyer and their professional advisors to evaluate the practice and prepare for the transaction.
