What is due diligence and what types of documents will the hospital want to examine during this process?
The due diligence process is intended to provide the prospective purchaser (the hospital) with the opportunity to identify and evaluate information necessary to understand the actual value of the practice, and for the parties to negotiate the representations and warranties provisions in the purchase agreement to allocate known (or know-able) risks. For example, if there is an ongoing or threatened lawsuit, the hospital may wish to ensure that the purchase agreement is drafted in a manner that clearly allocates the financial risk. The hospital, and/or the appraisal company, may seek access to a broad range of documents, including documents that you would otherwise consider extremely confidential. Before the hospital initiates due diligence, you should have in place a non-disclosure agreement with the hospital, to ensure that the information that becomes known to the hospital during the due diligence process regarding your practice’s finances, patient base, marketing strategies, and othe
