Assumed Assets v. Assumed Liabilities

If you are buying a veterinary practice, it is crucial to understand whether you are buying the business's assets or equity in the practice and therefore assuming the liabilities as well. By working with an experienced veterinary attorney, you can get up to speed on these accounting terms and structure the transaction in a way that protects your interests.

Mahan Law is a boutique legal practice that provides a powerful combination of sophisticated advice and exceptional personal service to veterinary professionals nationwide. We regularly advise buyers of veterinary practices and work to help them engage in successful transactions.  

Buying a practice can be an exciting and lucrative venture, as long as you have proper legal representation. Contact our office today to learn how we can help. 

Asset Purchase or Equity Purchase: what do you get?

When you buy the assets of a veterinary practice, you get the equipment, inventory, and furniture. By contrast, in an equity purchase, you get the same assets, additional assets such as working capital and accounts receivable, as well as all the liabilities. This includes:

  • Equipment loans
  • Balances in accounts payable
  • The practice's credit cards
  • Other debt

When you consult with Mahan Law, we will work with you to evaluate the practice's financial position and structure the transaction in a way that best suits your objectives.

Equity Purchase of a Veterinary Practice

An equity purchase is typical when you are buying into a veterinary practice, whether as a new owner acquiring a minority interest or an existing owner buying out another owner. The equity is valued differently in each scenario, however. Since buyers of a minority interest have no control of the business, they pay a lower price than the purchaser of a controlling interest. 

In short, the buyer acquires an undivided interest in all the assets and liabilities. For example, a buyer with a 25 percent interest in the veterinary practice will also own 25 percent of every asset and liability. Generally, the buyer does not get to choose which items will be included or excluded from the deal. Ultimately, purchasing an equity interest in a veterinary practice requires the advice of an experienced attorney working collaboratively with accountants, appraisers, and other financial professionals.

Asset Purchase of a Veterinary Practice

If you are buying 100 percent of the practice, you essentially create a new business entity so the transaction will be structured as an asset purchase. In addition to the tangible assets (e.g. equipment, inventory) you also acquire the "goodwill" or intangible assets associated with the business, such as:

  • The professional reputation of the practice
  • The practice's existing client relationships
  • Medical records
  • The business name 

The value of goodwill cannot be underestimated; these assets will provide a solid foundation for your practice. It is worth noting that you will acquire the practice's employees, which also allows for a seamless transition. Just the same, it is crucial to have a signed new employment agreement that clarifies their rights, responsibilities, and obligations. 

In an asset purchase, you do not assume the practice's liabilities, such as outstanding loans. Depending on the circumstances, you may also be asked to take over equipment loans and other lease and usage obligations, which means you take on the remaining payments. In this situation, it may be possible to negotiate a lower purchase price. Finally, buying the assets of a veterinary practice protects you from other liabilities acquired under previous ownership (e.g. employee claims, dissatisfied clients, payroll taxes). 

How Mahan Law Can Help with Assumed Assets and Assumed Liabilities

Our attorneys have extensive experience advising clients about veterinary practice transitions from both sides of the table. We leverage our experience representing sellers to advise buyers in asset and equity purchases. We are familiar with regional markets nationwide and are here to help you achieve your objectives in the veterinary space. 

By collaborating with a respected network of valuation experts, we will determine a fair and reasonable purchase price. Our attorneys will also make sure you understand your rights and obligations under the intended transaction. Whether you are solely acquiring assets or assuming liabilities, you can rest assured that your interests will be protected.

Contact Our Experienced Veterinary Attorneys for Assumed Assets and Assumed Liabilities

At Mahan Law, we have a proven history of helping buyers and sellers engage in successful transactions. If you are buying a veterinary practice, you need the informed representation we provide. Lead attorney Anthony Mahan is the owner of a veterinary clinic so he knows the ins and outs of buying a professional practice. 

As a fellow veterinary professional, he will always have your back and help you navigate all aspects of the deal. From identifying an available practice, to structuring the translation, to negotiating the deal terms, to conducting due diligence, to arranging for financing, to coordinating closings, trust Mahan Law to guide you every step of the way. Contact our office today to schedule a consultation