Merger processes involve a number of discrete yet inter-related steps. The general process is typically one of:
Getting comfortable with each other
Understanding each others philosophy of practice
Discussion and negotiation of key merger issues
Developing agreements in principle
Closing the merger
Implementing operational integration plans
The specific steps of the merger effort are generally as follows:
Friendship and courtship: Prior to substantive discussions, the groups likely have made contact with each other via informal means.
Commitment to move forward: At some point, the groups agree that they should "get down to brass tacks" and look at the merger in a more formal manner.
Antitrust review: Depending on the local market, a first step for many groups is to engage an attorney to conduct an antitrust review. While the details of such a review are beyond the scope of this document, the group should seek experienced legal counsel in this area if there are any concerns about creating significant market power.
Merger Committee appointment and empowerment: Unless the practices are very small, it wise to appoint a Merger Committee to do the bulk of the discussion and negotiation effort in the merger. It is desirable that the rest of the physicians empower this group to discuss and negotiate on the key merger issues. Typically this Committee includes one to three individuals from each of the groups.
Hire a Merger Facilitator: This is a vital part of the process. You need an independent person doing your due diligence, asking the hard questions, identify critical issues that must be resolved so the merger can take place, and basically acting as a referee during the merger process.
Confidentiality, non-competitive use, "no-shop" agreement: In order to protect their rights and the confidentiality of information, the groups should have their attorney draft a letter in which each group agrees to (a) Keep the other group's information confidential, (b) Use the information only for the purposes of merger negotiations and (c) Not seek or negotiate offers with others for a period of time. While this last point is optional, it can be important if the groups are going to expend significant resources during their negotiations.
Initial data gathering: In order to improve the efficiency and effectiveness of the merger discussions, a significant amount of information must be gathered from each group. Such information may include practice documents and financial information. In addition, it is typically appropriate to have each physician and administrator interviewed or surveyed to identify any merger concerns that they may have.
Perform due diligence: During this effort, the facilitator, attorneys and accountants review a number of practice related documents to identify any issue that might impact the merger from a legal perspective.
Merger Committee meetings/retreat to review data, discuss and resolve issues: Using the information gathered in step 6, the Merger Committee meets to discuss, negotiate and reach agreements in principle related to the key merger issues. There are two alternatives in how this process may be conducted:
a. For groups who have already had significant discussion or are very knowledgeable about each other, a Merger Retreat (typically 2 to 2 1/2 days) can be used to finalize agreements in principle.
b. For groups who have the need for more in-depth discussion and negotiation, a series of meetings are held during which agreements in principle are made. During this effort other professionals (such as accountants, attorneys, benefits consultants, etc.) are involved as needed.
Reach agreement in principle and execute Letter of Intent: Once most of the key decisions have been made, the groups execute a Letter of Intent under which they agree to merge under agreed upon terms unless certain events occur. This authorizes the groups to move forward with step 9.
Create merger documents: Once agreements have been made, the attorneys will draft:
Merger Agreement (primary purpose is requiring each group to make full disclosure about its activities).
New Entity Corporate Documents
New Entity Shareholder Agreement (Buy-sell)
New Entity Physician Employment AgreementsOther needed documents
At the same time, the accountants will be developing the financial information needed to close the merger.
Perform due diligence: During this effort, the attorneys and accountants review a number of practice related documents to identify any issue that might impact the merger from a legal perspective.
Develop post-closing operational integration plan: The work I have discussed up to this point is focused primarily on the legal and organizational aspects of the merger. Once the groups are on track to merger an operational integration plan must be developed.
Merge ("Day 1"): The day that the papers are signed and all are committed to move forward.
Implement post-closing integration plan: The operational integration plan is implemented.
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