Transitions Are Never Easy

It has been an interesting and exciting few months. Having counseled and represented dental professionals in practice transitions for a number of years, it has still been a learning experience undergoing my own practice transition. It has given me new perspectives on the process and, I believe, will serve my clients well in future transitions. I thank and appreciate all of the colleagues and advisors who assisted me and look forward to renewing this blog as an active dialogue for dental professionals.

Which leads us to the topic of dental practice transitions and a prime example of why advance preparation and planning with competent and thorough professional advisors is the best practice. A recent case from the Michigan Court of Appeals illustrates what happens when a deal goes bad due to inadequate representation and advice. Buyer and Seller entered into a practice purchase to take place with three equal yearly installment payments. The seller was allowed a draw and certain other fees, payments and timing was controlled, loosely as it turn out, based upon whether profit was above or below her draw amount. The profit for seller and buyer would be distributed pursuant to then percent of ownership. The method for determining and calculating the profit was a short, handwritten addition to the last page of the contract.

Things got ugly. Seller believed the accounting method (accrual) used by seller's accountant had understated her profit and caused her to overpay, seller believed he was underpaid for account receivable, which weren't mentioned in the contract. Then it got worse. And all of this happened after the three years and the purchase having been completed. Three years later the case was tried to a jury. Eighteen months after the verdict the court of appeals issued its opinion upholding the jury verdict. The end result: a) the seller got $0 on his claims, b) buyer was awarded approximately $25,000 on her counter-claims, c) seller was required to pay $51,000 in attorney fees to BUYER (in additional to whatever he had to pay his own counsel for trial and through appeal) plus interest on all of it.

Sadly, almost all of this could have been avoided BEFORE the sale was concluded had the parties had a properly drawn and executed Purchase Agreement, had competent Accounting advisors and recognized that the only guaranteed winners in litigation are the lawyers.

Now, I'm all for attorneys making money, but I would rather see dental professionals pay for competent legal representation and avoid litigation costs.

Remember, it is never too early to speak with an attorney and most attorneys, and certainly this attorney, do not charge for an initial consultation. All you have to lose is a lot more money when it isn't done right.