Buying A Practice

Challenge

A medical practitioner group was looking to expand its practice to a new market. It identified a potential acquisition that had many attractive characteristics and that would complement its needs. However, the seller had already refused other offers that didn’t meet his above-market asking price.

Consensus Solution

Consensus began the engagement by surveying the local market to best determine a “market” value for the practice. Our findings supported our client’s inclination, indicating a value that was considerably less than the price offered by the seller. Despite the disparity, we knew that the seller had refused two offers (from other potential buyers) that exceeded our valuation.

Rather than submitting an offer in writing, our strategy was to speak with seller directly. We had predicted that the seller had overestimated the business’ value because he had erroneously factored in a sentimental value – the practice represented his life’s work and it, therefore, was especially valuable to him. Thus, we believed that his emotional tie to the business would demand careful attention throughout the negotiation if we had any hope of procuring the business at such a substantial discount to his asking price. We felt that it was critical that we negotiated in a forum that allowed his emotions and sentimentality to surface and be addressed; thus we insisted on beginning the process with face-to-face conversations.