Also check whether other suitable buyers might be interested before agreeing to exclusivity. You need enough information to decide whether to proceed with this buyer, seek alternatives or further prepare the practice.
An unsolicited approach can arrive before you have decided to sell. Start by recording your own position: when you want to leave ownership, whether you want to keep consulting and which commitments you are willing to make. If you have co-owners, compare those priorities before responding.
Get the offer into a form you can assess
A conversation about a price leaves questions unanswered. Ask the buyer for a written proposal covering:
- The purchasing entity and the person authorised to make the offer.
- What they want to buy: the business assets, all shares or a specified ownership interest.
- The price, payment dates and any proposed adjustments or conditional amounts.
- How they intend to fund the purchase and which approvals remain outstanding.
- The conditions, proposed due diligence period and target settlement date.
- Your continuing clinical or management role, any retained equity and restrictions on your future work.
Include the premises position. If you own the property, does the buyer want to purchase it or lease it from you? If the practice leases its premises, identify the proposed lease arrangements and any consent required.
Have your advisers identify the missing terms and questions to send back. The Australian Government's business sale guide sets out matters to settle in negotiations and the contract, including payment, assets, conditions and handover.
Separate the headline price from the payments
Record how much the buyer proposes to pay at settlement, how much is scheduled for later and how much depends on future events. Ask your accountant to compare the amounts you could receive after transaction costs, tax and any required adjustments.
An earnout makes part of the purchase price depend on future performance. You need to know the target, how the buyer will calculate it, when you'll be paid, and who controls the decisions that affect it. If you must keep consulting, examine that work commitment alongside the payment formula.
Vendor finance involves leaving part of the price owing by the buyer under agreed repayment terms. Ask your lawyer about security, repayment obligations and what happens if the buyer defaults. Adam Mazzaferro's Medius article on vendor finance, earnouts and staged equity explains the documentation questions behind these arrangements.
Consider two invented offers for the same business assets. One proposes $1.2 million, comprising $900,000 at settlement and up to $300,000 under an earnout. The other proposes $1.05 million at settlement. The first has a higher maximum price; the second provides $150,000 more at settlement. These figures illustrate payment structures, not practice values. You still need to assess the conditions, later payments and obligations under each proposal.
Ask your accountant to compare several outcomes, including receiving none, some or all of the earnout. If you retain equity, record that ownership separately from cash proceeds and have your advisers examine how you could sell it later.
Use the practice valuation guide to prepare questions about the earnings and assumptions behind the proposed price.
Check the buyer as well as the offer
Ask who will fund the acquisition, what evidence of funding they can provide and who must approve the purchase. Distinguish a buyer with finance in place from one who still needs lender, investor or board approval. Ask what could delay those decisions.
Business Queensland recommends checking a prospective buyer's financial capacity, experience and plans for the business. For a GP practice, investigate how the buyer intends to manage staffing, practitioner arrangements, billing policies and the ownership transition.
Request permission to speak with owners from practices they have acquired. Ask those owners how the buyer handled settlement, any later payments and the agreed transition. Use their accounts to identify questions for your own transaction.
Then compare the buyer's intentions with the written proposal. Have your lawyer advise which commitments can be documented and how they would operate.
Decide whether to approach other buyers
Aim for three qualified buyers from whom you can seek comparable proposals. That is a practical target, and the available options depend on your practice and the market. A qualified buyer needs a credible capacity to fund the purchase, a reason to acquire the practice and active interest in progressing.
Ask your adviser to investigate a shortlist of suitable parties while preserving confidentiality and observing any existing agreements. Give interested buyers enough consistent information to prepare comparable proposals. Be accurate about the process: never suggest that competing offers exist unless they do.
If only one credible buyer emerges, assess that proposal on its evidence and terms. An independent valuation, funding checks, and an offer that meets your priorities may support proceeding. Record which alternatives were considered and why you chose this buyer. Three unsuitable parties would add work without improving that decision.
Review exclusivity before you sign
A buyer may ask for a period in which you agree to deal only with them while they investigate the practice. Understand what you would be giving up and what work the buyer commits to completing during that period.
A preliminary document may be called a term sheet, letter of intent or heads of agreement. Rouse Lawyers explains that term sheets can contain binding confidentiality and exclusivity provisions even where the parties do not intend the proposed sale terms to be binding. Have your lawyer review the wording before signing.
Ask about the scope of the restriction, its start and end dates, any extension rights and the circumstances in which it can end. Agree the information the buyer needs, deadlines for their review and who will report on progress. Have your lawyer identify any costs or other obligations that could survive termination.
Avoid assuming that an expression of interest, a deposit or an offer expiry date settles these questions. Ask for an explanation of each document's effect on your particular sale.
Control the information released during due diligence
Due diligence is the buyer's investigation of the practice and the information supporting the proposal. Prepare a document list, nominate who will coordinate requests, check responses and keep a record of what you supplied.
The sale process overview explains how preparation and buyer discussions fit together. Keep enough time in your plan for your advisers to review documents and resolve the questions raised.
Agree a staged disclosure process with your advisers. The Office of the Australian Information Commissioner recommends considering de-identified information and controls on access during a business sale. A confidentiality agreement does not replace privacy obligations.
Use aggregated activity information where appropriate. Do not release identifiable patient records to demonstrate the practice's value. Have your lawyer assess any proposed disclosure of personal information and the requirements applying to your practice.
If the buyer later seeks a price reduction, ask for the finding, evidence and calculation behind it. Review those with your accountant and record any agreed change to the proposal. Keep your own questions about funding, payment and the transition on the same timetable.
Respond while you assess the proposal
If you have not agreed to exclusivity and are still considering your options, you could adapt this reply with your advisers:
'Thank you for your interest. I would like to review a written proposal with my advisers. Please set out what you want to acquire, the price and payment structure, funding, conditions, timing and any continuing role you propose for me. I am still assessing my options and have not agreed to exclusivity. Once I have reviewed the proposal, I will come back to you about the next steps.'
Use the accompanying offer comparison checklist to record each buyer's answers. Mark unanswered items as unknown, assign someone to resolve them and set a review date. Compare the proposals against the priorities you and your co-owners recorded before choosing a preferred buyer.
Get the practice and your advisers ready
If the approach arrives before you're ready, start with Proxeno's free business acuity assessment to review how the practice operates. Work through the sale readiness check when the practice is in shape for a sale. Neither assessment values the practice or determines whether you should accept an offer.
Proxeno is a matchmaker and an initiative of Medius Global. It helps organise practice information and owners' preferences, and identify buyers worth approaching. You can manage its seller process yourself or work with a consultant. Your accountant advises on the financial outcomes, your lawyer on the agreements and an independent valuer on value. The owner and buyer agree terms directly.