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Purchase or sales advice including negotiation

Most practices for sale are not advertised as the sale of a practice or partnership-share will occur between close associates. While the details of each transaction remain confidential to the parties, in a more comprehensive sense they add to the Synstrat database of transactions in the market place. Similarly, as rarely as the best practices come onto the open market, a significant number of the practices that are advertised heavily have serious problems. They may be located in chronically low fee areas, or they may have lease conditions attached to their premises which impact negatively on their value.

Synstrat routinely checks proper financials and crosschecks key expense ratios to ensure that the performance information being presented on a practice for sale is reliable.

Second opinion for practice vendors

It may be that a practice accountant:

  • is insufficiently aware of the market,
  • is unable to distinguish adequately between types of practices, or
  • does not have the confidence of one of the practitioners involved.

It is not unusual for practice accountants or other valuers, who do not have substantive knowledge of the practice market, to arrive at unrealistic values. An inflated or incorrect value obtained from these sources can lead to unrealistic expectations. This, in turn, can discourage potential buyers, inflame partnership disputes or delay any possibility of settlement in divorce proceedings. Synstrat can provide you with the essential 'second opinion'.

Second opinion for practice purchasers

When buying a practice from a broker, who is also the source of the valuation, there may be a suspicion that the valuation is biased towards the vendors' interests. A second opinion from Synstrat can either prevent the buyer from paying an unrealistic price, or alternatively give comfort to the buyer that the price demanded is commercially realistic.

Practices with low profitability

The question sometimes arises as to whether a practice with low profitability has significant value. The answer is to evaluate the income and cost structure of the practice against benchmark practice performance data. Costs that are difficult to adjust are then identified and costs that may change with a change in ownership are modelled against benchmark data. This can identify what the purchaser is realistically likely to achieve out of the practice over time.

Synstrat can assist the buyer in assessing whether:

  • the practice has the potential to be more profitable,
  • the purchase represents a sound business decision, or
  • the practice has structural weaknesses such that an increase in profitability is unlikely.

Premises that have a high occupancy cost and which cannot carry the scale and fee base of the practice have a weakness that may not be overcome. It is imperative that the buyer understands the problem, and does not buy a practice at a price that will prove irrecoverable.

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