PART 3 OF 3: How to Decide and Structure the Deal

A practical framework for choosing and documenting the right structure.

Choosing between an asset and an equity purchase is a matter of weighing competing priorities against the realities of the specific practice. This article offers a framework for making that decision and structuring the transaction to reflect it.

Weigh the buyer's and seller's priorities

The structure that serves one party often disadvantages the other, so the decision is usually negotiated:

• Buyers typically prioritize limiting liability and obtaining favorable tax treatment, which point toward an asset deal.

• Sellers typically prefer a clean exit and the tax treatment of an equity sale.

• The gap between these preferences is frequently bridged through price, indemnification, and specific allocations of risk.

Let the healthcare realities test the preference

A party's preferred structure must survive contact with the regulatory facts. Before committing, confirm that the chosen structure works given enrollment and billing considerations, license and permit transferability, Corporate Practice of Medicine and ownership eligibility, and the consent requirements in material payer and vendor contracts. Any one of these can make the preferred structure impractical.

Build protection into the agreement

Whichever structure is chosen, the definitive agreement should allocate the risks the structure leaves open:

• Representations and warranties covering financials, compliance, licensure, billing, and undisclosed liabilities.

• Indemnificationwith survival periods, caps, and baskets suited to the deal, which matters especially in equity purchases where the buyer inherits the entity.

• Purchase price allocation in an asset deal, negotiated for its tax consequences.

• Closing conditions tied to required consents, licenses, and regulatory approvals.

• Escrow or holdback arrangements where warranted by identified risks.

Plan the transition regardless of structure

The structure determines much of the mechanics, but every healthcare deal needs a transition plan: credentialing and enrollment steps, patient notification and records handling consistent with privacy law, employee transition, and updates to licenses, permits, and insurance effective at closing.

Involve counsel and tax advisors early

Because structure drives liability, tax, and regulatory outcomes simultaneously, the decision is best made with legal and tax input before the letter of intent fixes expectations. Changing structure after the parties have aligned on price and terms is difficult; getting it right at the outset is far easier.

How West Coast Health Law Can Help

We help healthcare buyers and sellers select the right transaction structure and document it with the representations, indemnities, and protections the deal requires. If you are planning a medical or dental practice transaction, we can help you structure it to fit your goals and the regulatory realities. If you are planning a purchase or sale, we can help you get the structure right from the start.

West Coast Health Law offers a FREE consultation which you may schedule by clicking the button on our website.

This article is provided for general informational purposes only and does not constitute legal advice or create an attorney-client relationship. Laws change and every transaction is different; consult a qualified attorney about your specific situation.