Physicians, renowned for their intelligence in their field, often lack an intuitive grasp of the intricacies involved in expanding and professionalizing their practices. Their primary focus tends to be on delivering exceptional patient care, with less emphasis on the business aspects of running and growing a medical practice. For physician leaders considering the development of their business through mergers or acquisitions, a thorough understanding of various potential issues and challenges is crucial. The following topics are designed to help guide initial thoughts towards a successful and lasting business deal. These themes touch upon fundamental concerns, yet it’s important to remember that there are numerous other considerations, often unique to the specific entities involved in any such transaction.

Why?

Drivers for a Deal: Understanding why the organization wants to merge or acquire is crucial. Is it for financial stability, market expansion, technology access, or to enhance competitive positioning?

Deal Type Consideration: The decision between selling a share of the practice’s revenue stream, with clinicians retaining ownership and some control, versus a complete sale of the entire organization, where clinicians usually transition to employees of the acquiring strategic partner, carries substantial implications for the involved clinicians.

Growth Strategy: Whether the move is defensive (e.g., responding to market pressures) or offensive (e.g., capturing new opportunities) will shape the approach and negotiation strategy.

Expectations: Clear goals for the post-merger or post-acquisition phase are essential for aligning all parties and measuring success.

Future Vision: A 5-year projection helps in assessing the long-term viability and strategic fit of the deal.

Governance

New Governance Structure: The post-merger governance model will dictate decision-making processes and control mechanisms.

Creating an Effective Model: It’s important to find a balance that satisfies all parties while maintaining efficient and effective management.

Board of Directors Control: Who will have significant influence on the board impacts the strategic direction post-merger.

Rights and Stock Classes: Understanding and negotiating shareholder rights, stock dilution policies, and vesting schedules are vital for protecting interests.

Departure of Partners: Terms dealing with stock and partnership status upon departure need clear articulation to prevent future disputes.

Finances

Understanding Private Equity and Strategic Partners: Knowing the differences and implications of various types of financial backers is key for aligning with the right partner.

Capital Access: Ensuring the financial sponsor can adequately fund growth and scaling efforts is crucial.

Expense Allocation: Transparent and agreed-upon methodologies for allocating expenses post-merger ensure financial clarity and fairness.

Communication and Culture

Understanding Between Parties: Ensuring clear communication and mutual understanding between clinical and financial entities is critical for a successful merger.

Cultural Alignment: Merging entities with aligned cultures and values is often a key determinant of successful integration.

Communication with Stakeholders: Keeping stakeholders informed throughout the process maintains trust and morale.

Operations

Retention of Key Personnel: Strategies to retain critical staff post merger ensure continuity and stability.

Integration and Restructuring Plan: A clear plan for integrating operations, staff, and systems post-merger is crucial for a smooth transition.

William R. Leighton, Jr., M.D., M.B.A., as the founder of Clevehouse Advisors, LLC, brings a unique perspective shaped by his extensive experience as a physician. His journey from the initial spark of an idea to its complete fruition, navigating through various stages of restructuring and recapitalization, has equipped him with a depth of understanding and insights that are rare among physicians. This comprehensive experience, encompassing both the execution of deals and managing their consequent impacts, offers invaluable expertise to those he advises. Dr. Leighton’s dual background in medicine and business allows him to provide a distinctive and highly informed viewpoint to his consultancy roles.