Asset Purchase Agreement template
Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice, contact me (Michael Carabash) or David Mayzel.
This is the second of a series of blogs I’ll be writing about buying and selling the ASSETS of a dental practices (as opposed to the shares of a dental practice).
In my last blog, I talked about the letter of intent that is typically entered into before the asset purchase agreement. It outlines the basic terms of the deal. In this blog, I’ll be discussing some things to think about before getting into the nuts and bolts of the asset purchase agreement.
Things to Think About
Before discussing the terms of the asset purchase agreement, I think it’s worthwhile to lay out some basic ground rules when drafting, negotiating, and concluding an asset purchase agreement. First things first: when you involve lawyers, they act as your champions or hired guns. They are there to protect your rights and advance your interests. That’s why it may take a bit longer and cost a bit more than what would otherwise be the case if you tried to do this without them. As a dentist seller or purchaser, you may have a very good relationship with the other dentist purchaser or seller. You may want to keep things cordial and amicable throughout your dealings. You may want to be accommodating. Just remember this: because of the one-off nature of the transaction, you must protect yourself as much as possible. Sure, you may continue working alongside the other dentist after the transition. But, at the end of the day, the buck stops with you. So just make sure you and your lawyer cross the t’s and dot the i’s before signing.
Can you negotiate a term of the agreement? Sure you can. Just remember one thing: you’ll be better off by listing and prioritizing your requirements (do this with your lawyer) so that you are prepared to give in to the other side if they want something which isn’t high up on your list. You’ll also want to try to resolve any minor issues first before tackling the major ones. This will keep the negotiations moving along at a quicker speed; most of the time can then be spent addressing the larger issues. You should also tell your lawyer what your threshold for pain is: is this term or condition going to be a dealbreaker? What if you don’t get it? Is there a reasonable alternative that you can use to get around it? Case in point, I was working with a dentist who wanted a certain condition in an agreement with the Landlord. The Landlord refused to put it into the agreement because of accounting issues. So, instead, we asked the Landlord to agree to remove the “entire agreement clause” in the lease (which would have prohibited other agreements from being a part of the lease) and then drafted a second much smaller agreement with the Landlord which the Landlord was OK with. Problem averted!
There’s always going to be an issue of risk. Is the dentist purchase willing to accept the assets ‘as-is’, or will there be certain representations about the assets (i.e. statements of fact about the past or present condition of the asset). Will there be an indemnification as well from the seller in case the asset purchase agreement is breached? What if hidden liabilities associated with the assets are found (e.g. liens, no clear title to the assets, etc.)? Will the seller be required to indemnify the purchaser for these hidden liabilities as well? Remember that, in a typical asset purchase and sale, the liabilities of the dental practice aren’t included. But the assets themselves need to be free and clear of title. And things like the Bulk Sales Act need to be complied with in order to avoid having the transaction undone.