Gary W. Herschman, Member of the Firm in the Health Care and Life Sciences practice, in the firm’s Newark office, and Laurajane Kastner, Member of the Firm in the Health Care and Life Sciences and Corporate Services practices, in the Newark and Princeton offices, were quoted in The Ambulatory M&A Advisor, in “Tips for Owners on Drafting a Clear ASC Operating Agreement,” by Richard Romero.
Following is an excerpt:
“In my experience I have had ASCs that do it both ways – if there are physicians interested in joining or interested in increasing their percentage of ownership, they might choose to make an outright purchase. Whereas in other cases, there may be a redemption at FMV by the ASC. We also sometimes include a ‘bad boy’ clause that is triggered when the departure of the physician is ‘for cause’ or other specific enumerated instances. In those instances, there might be a reduction in the price paid by the company for the redemption,” Kastner says.
Herschman says that sometimes Operating Agreements provide for redemption at “fair market value” – but many ASCs prefer including a “purchase price formula” that equates to what the parties think is fair, so as to avoid having to engage a valuation firm each time there is a buyout (and avoid the parties disputing who to engage, and whether the valuation its accurate, etc.).