How Rogerson Business Services Sold A California Medical Practice Quickly
About The Medical Practice
This case study depicts a successful medical practice in California that was doing well and should be fairly simple to sell.
Ocean Medical Family & Urgent Care (“Ocean Medical”, or the “Clinic"), established in 1991, is a same-day Family and Urgent Care medical clinic located in South Redondo Beach, California.
According to the Clinic, in 2020 it expected less than its average of 12,500 patient visits as a result of COVID. The Clinic also made approximately 4,000 outpatient referrals to hospitals and other specialty medical organizations throughout Los Angeles County in 2020.
For many years, the Clinic has treated Ocean Medical patients on a regular basis. Repeat clients make up around 65% of the Clinic's patients. In addition, the Clinic serves a desirable demographic target market. According to statistics from the year 2020, the population of Redondo Beach is 65,801 people according to the 2010 U.S. Census, with an average household income of $134,928 and a median age of 40.2 years. Doctor Bradley Smith founded Ocean Medical and serves as its president, as well as supporting physician assistants who work seven days a week and weekends.
The medical practice also boasted a solid reputation for excellence. Many repeat customers were attracted to the clinic. In June 2021, the owner decided to sell his medical firm, but he made that decision in May 2020. He was spurred on to sell his medical practice wishing to retire, and a marketing campaign began. The aim was to identify an interested and competent buyer within a reasonable amount of time.
The Challenge Selling Ocean Medical
Finding qualified and interested buyers for a medical practice in California is hard, especially since they must be licensed doctors in the state. While the financial performance of the medical practice was appealing to potential buyers, there were additional factors to consider. Financing would not be one of them in this situation since the health of the company would easily support an SBA loan if necessary.
A doctor's license is only valid in the state where it was issued; however, just because someone is licensed in a different state does not imply that they are authorized to practice medicine in California. The Medical Board of California must first register them. Before closing the sale of the medical practice, the steps of selling a medical practice must all be completed. The licensing agency and an attorney who specializes in that field, or a medical business broker who can often provide helpful information quickly and effectively, are typically the best sources for this kind of data.
They needed not only the correct down payment but also access to an SBA or conventional loan for the medial practice for sale in California. Ideally, the ideal individual would be a doctor with current licenses or who could easily obtain them, as well as being financially stable.
The Qualified Buyer
Approximately two months after the medical practice went on the market, the ideal buyer responded to our marketing efforts. They not only had a down payment large enough to get a loan, but they were also interested and ready to purchase a medical practice.
The buyer didn't have all of the required licenses but had the appropriate one. This license made it easier to acquire the rest of the medical practice's requirements. Everything appeared to be in order.
The LOI or Letter of Intent
During their first meeting, the buyer and seller spoke over the phone and provided each other with information about themselves. As the two got to know one another better and discussed their requirements and aspirations, several face-to-face meetings took place. The buyer then made an offer following the completion of this work.
The discussions began with an offer. The buyer sought an SBA loan to fund the purchase. There was no seller financing available. Once the aforementioned details were agreed, upon and the parties reached a settlement, the buyer signed a Letter of Intent approved by the seller in late September 2021. The closing date was originally set for early November 2021.
SELLING MEDICAL PRACTICE PROCESS
THE NEGOTIATIONS PHASE
The next stage of a transaction, following the agreement, is due diligence. This is when the buyer checks the seller's statements to ensure they are true.
In order for due diligence to proceed smoothly and for the timetable to remain unaltered for a rapid closing, both sides had to be prepared. This is one of the issues that a business broker can help each side comprehend.
The buyer wants to know everything there is to know about the medical practice for sale. Naturally, they want to understand every detail of what they are getting. The seller is concerned about not disclosing too much competitive information. They are also worried that if they hear the medical practice is up for sale, their employees will leave. This is one of the trickiest balancing acts imaginable.
In this situation, the seller was meticulous. The seller's records were current and had been restated to show the business's true earnings and potential.
However, the buyer was disorganized and appeared disconnected, and what would have been a "deal-breaker" if those concerns had arisen during due diligence. Because of Andrew Rogerson's level of an organized deal team in Sacramento, which serves all of California; the organization, due diligence went smoothly, and few if any issues were encountered.
Both were prepared to sign the final purchase agreement.
PURCHASE AGREEMENTS
In this case, one definitive agreement was made.
The agreement was structured as a stock sale. The type of sale can vary for tax
purposes and to suit either party, but in this case, a stock sale fit both of their needs.
SBA LOAN PROCESS
As we previously stated in the introduction of this case study, obtaining or selling a medical practice is never simple.
This is especially true when an SBA loan is involved. Why the complication?
The most significant reason is that a commercial transaction, by its nature, has a flow or rhythm. Because the transaction must come to a halt while a certain item is addressed before the next stages can be carried out, the loan process frequently disrupts this flow.
There was just one business valuation to figure out what the medical practice is worth in this situation.
The sale of this medical practice, which was supposed to close on December 2, 2021, closed unexpectedly early in November 2021, making it one of the quickest medical practice sales Andrew has seen throughout his 15 years in the industry.
THE ESCROW COMPANY
After all the due diligence, legal, accounting, tax, SBA loan paperwork, asset titles, and allocations are in place, everything about a transaction is passed to the escrow company.
The fact that escrow is necessary for most commercial transactions in California is one of a kind. There are several reasons for this, all of which aim to safeguard both the buyer and seller.
Many medical business brokers will attempt to take care of a lot of steps in the transaction without the assistance of an attorney, however, it is typically better if both sides have legal counsel review all papers before the final escrow and closing of the sale.
We at Rogerson Business Services strongly advise both buyers and sellers to have an attorney on their team to safeguard themselves. Selling a business is usually one of the most complicated and financially significant decisions that someone will make in their life. Their company is frequently a component of the seller's retirement plan, and getting things right the first time is critical.
The legal ramifications of any transaction can be significant, ranging from escrow to taxes to leases to licensing. There are a lot of legal complexities involved in buying and selling a company, and it's something you should never attempt alone. A deal team is required to surround yourself with experts who are trained business brokers. That begins with hiring a certified business broker
Are you looking for a broker to sell your medical practice in California? To assist you every step of the way, you'll need a medical business broker. We at Rogerson Business Services want to be your medical business broker. Get in touch with us now. We'll get you up and running selling your medical clinic as soon as possible.
HAPPY MEDICAL PRACTICE SELLER
Dr. Bradley Smith, the owner of Ocean Medical Practice, was thrilled when escrow closed. How quickly and how many potential buyers there were interested in it was fascinating, Dr. Smith noted.
"Andrew is incredibly organized which is vital to this process. He made a very challenging situation tolerable. Andrew is a must have on your side if you are planning on selling your practice or medical company. I have never met someone as caring and helpful as Andrew in my 30 plus years of medicine.”
HAPPY ACQUIRER
The buyer of the medical practice was ecstatic when escrow finally closed. The buyer was disorganized and disconnected on most issues, eager to take control of the operation. Because it took such a short time to address all of the concerns, things became difficult; nevertheless, the buyer worked tirelessly at all times to ensure that the company purchase succeeded. And the good news is that it is all paying off. Here is Dr. Smith's feedback on the buyer:
"The nicest aspect of selling my practice was giving the new buyer instructions on how to maintain it successfully, but I'll avoid selling a medical practice to non-doctors. The experience in this buyer's situation was acceptable, but not outstanding.
I was ecstatic when I first learned that I would be selling my medical practice, but later in the process, I became frustrated because of the buyer's lack of organization skills and poor team. So, if you're thinking about selling your medical practice in California, sell only to doctors or firms with previous experience buying medical practices.
In the end, it all comes down to whether or not you work with an effective agent who is essential to the success and emotions of your transaction.”
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