How are Investments in Equipment Treated During the Sale Process?

Doctors who have had the opportunity to discuss a potential sale of their practice with another optometrist often wonder how their equipment is taken into consideration during a sale.

If you are selling to another optometrist, it is often the case that an assessment of equipment value (working order evaluation, age of equipment, money owed toward the equipment, etc.) is conducted and included as a stated part of the sale price.  It is often that the buyer will provide a value for equipment and a value of goodwill (that sometimes intangible value of your place in the community, your patient records, your brand value, etc.).

If you are selling to PE, the price calculation does include the equipment, but in a less overt way leaving the seller to often wonder if it is included or what is the value placed on it. It is included in the price and all equipment must be paid for in full if there are any monies owed.

Your price will not vary if you have a lot of equipment or a little equipment.  PE buyers see the equipment value is in its’ ability to generate revenue. So, if equipment is generating revenue for you, the price methodology captures that value.  Of course, if the equipment is not generating value (revenue) through your ability to charge for an assessment or through a service allowed for by the equipment, then the equipment has little to no value.

Remember, if you are leasing to own equipment, you can add back the last 12 months of those payments to profit in exchange for the PE buyer receiving that equipment as part of the sale and having no payments associated with it after the sale. This can have a very positive impact on your price. However, you are also responsible for satisfying that lease in total prior to the sale, so take that into consideration as well.

This is not a logical process like many aspects of the sale of your practice to private equity, but it is a process that works and can be explained by the private equity buyers.