More and More Mergers
In January we ran our Managing Change seminar, which we have been doing in conjunction with BDO LLP and others for over 20 years.
Before Christmas it was announced that a new voluntary contract would be offered to practices or federations with a combined list of 30,000 patients. We don’t have much detail on what this contract will look like, and at this point I would be wary of placing too much reliance on the 30,000 number - which will be appropriate to some practices in some areas and not to others. However, there are plenty of other good reasons to merge at the moment: I have had a number of conversations with practices which are effectively 'healthy' - good patient list, decent building, good practice staff, etc - but who just can't find enough partners willing to own those practices. A merger may well be an ideal solution to this problem, in that it brings more partners into ownership.
I made the point in my presentation that no-one should go into a merger in the hope that there will be considerable savings to be made. Perceived wisdom in the legal profession is that if there are any savings to be made from a merger then it is still 3 or 4 years before those savings offset the actual cost of merging! I suspect the same is true in GP practices. Any cost savings should be seen as a bonus if they arise - we would suggest they shouldn’t be seen as the main driver.
If you are planning a merger I suggest there are three steps to go through before getting the lawyers involved in earnest (although obviously we are always happy to talk on a non obligation basis if you are planning a merger):
- Do the two sets of partners work well together? Is the cultural fit right, are the partners willing to become jointly and severally liable with the partners at the other practice? If the answer to this is no then it probably isn't worth pursuing - and bear in mind that every partner has an effective veto over a merger, so this aspect really has to be right.
- Are the two practices a financial 'fit'? Get a specialist accountant to give an overview of whether the finances can be brought together easily or whether it will mean one set of partners taking a financial hit. If partners at the higher earning practice are going to have to take a pay cut then the merger is unlikely to be easy to do.
- How can the premises be brought into the new merged partnership? Are the partners willing to buy into each others' buildings (or share liability for the other practice's lease), and if so at what price? This is often the main block to a merger, and takes the most time to discuss.
If these issues can be sorted then everything else tends to flow from there. We are always happy to discuss in more detail.