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Evaluating an Ownership Interest Offer

 

November 11, 2017

 

 

Question:

Hi Jennifer, 

The group I joined several years ago is now offering me an ownership interest.  I'm not really sure where to start to evaluate whether I should be interested.  How should I proceed?

Thanks in advance, 
Dr. S 


Answer:

Glad to hear your first instinct is question the evaluation process!  Sometimes I hear a bit of naivete that every ownership offer is a great idea with guaranteed financial upside.  Not the case.  The devil in each offer is in the details - and often times the paper offer doesn't tell close to the whole story.  The first step in evaluating an offer is to get into the details of financial viability and standing of the entity ownership is being offered in.  Doing so independently may not be much use without a financial background, which is why we look heavily to your accountant to provide a comprehensive assessment.  Now, if the offering entity is not willing to provide you access to the books and records, then we have a problem and our evaluation and interest in the potential ownership opportunity may end right then and there.  Where this may not be the case is when you are being offered a risk opportunity where you know you will have limited ownership interest and its been conveyed upfront you will have no access or decision making authority - okay, then you are heading into a gamble, knowingly, and may lose your shirt.  I'm ok with it if you are.

For the scenario you are looking to have substantial footing in the venture, once we are comfortable with the financials and projections of the entity, we turn to the offer details - when do you get your interest?  How much?  What authority does that come with?  Will there be departing owners you may be responsible for buying out?  When and at what price?  How do you get out?  How are you paid and what while a partner?   Are you signing on to debt personally? These questions should be addressed in your offer documents and the entity operating documents.

Working with competent healthcare counsel is necessary before signing. Do not sign until you understand the answers to the aforementioned questions.  And, better yet, have attempted to better you position - if negotiating is on the table. 

For more specifics, I need to see the offer.  


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