Surgery Centers: Just Say No to No-Shop Clauses

The following article is written by Blayne Rush, MHP,MBA, president of Ambulatory Alliances. These are the opinions of the author and not necessarily those of the publication or publisher.


You, of course, want to sell your ASC for its maximum value. Potential buyers, on the other hand, want to reach an agreement on a lower price, preferably even below market value. One of the most effective tools buyers can use to purchase your ASC below market value is a no-shop clause (or no-solicitation or exclusivity clause). But be cautious: Such a clause locks you down and prevents you, the physician-owner, from speaking with other potential buyers, i.e., "shopping" the deal.


Once a no-shop clause is signed, the physician-owner of an ASC must negotiate solely and exclusively with that one potential buyer for a set period of time, a condition that could have serious pitfalls. In fact, it prevents you from ever discovering your ASC's true market value. Market value, by definition, is the highest price a seller can obtain for their ASC in a competitive and open market.


I liken these agreements to dating: One partner sets the rule for the courtship and wants to be able to date around while they require the other partner to make a total commitment. Sounds fair, right? Well, it only works if the committed partner never figures out they could have found someone better.


The majority of potential investors attempt to get physician-owners of ASCs and radiation oncology centers to execute one of these no-shop documents as soon as possible. They will tell you the due diligence process is tedious and expensive to conduct, and therefore they need you to execute the agreement before they even start the process of evaluating whether or not they're interested in buying your center. Don't let yourself be pressured.


Each negotiation between ASC buyer and seller will start with a process of requesting and providing detailed information. While it's true that the process will, in the later stages of the due diligence process, become time consuming and more expensive for the buyer, this is simply not the case in the beginning stages of the due diligence. With the advent of technologies such as e-mail, video conferencing and virtual data rooms, the initial stages of the due diligence process are more time consuming to the seller than to the buyer. ASC owners are the ones who have to organize the financials, paperwork and files; buyers will merely give you a list.


So in reality, by asking for a no-shop clause early in the process, the buyer's main goal is to remove the ASC or radiation oncology seller's number one source leverage: alternatives. Multiple, competing buyers for your ASC or radiation therapy center will directly translate into an increased sales price. Buyers know this, and that's why their full-time professional development team is trained to create a situation where they are the best — or only — option. They want to negotiate with you without any other interruptions. They want you to sell your center to them for the least possible amount.


Meanwhile, you want them to pay "market value", but the only way to define what market value is for your specific surgery center or radiation therapy center to speak with multiple buyers and multiple types of buyer at the same point in time. (Note: Please don't confuse "market value" as I use it here with Fair Market Value, which is a legal valuation term, with a conceptual buyer and conceptual seller.)


It's true you will eventually need to execute a no-shop clause, but I like to see this done at the same time as the binding letter of intent. And you can achieve this postponement without entirely losing a potential buyer's interest. A key to negotiations is to only give something if you get something in return, so when a buyer asks for a no-shop clause, you need to ask for a breakup fee. This will keep the no-shop clause at bay until the buyer is fully committed to buying your center.


Selling your ASC can be a highly exciting process, but don't handcuff yourself by committing to a buyer — and therefore committing to that buyer's price — before your center has had a chance to find its value on the full, open market. Investor-buyers have the experience and know-how to engineer the process in their favor, but don't let them rush you into a no-shop clause that limits your opportunities.


Blayne Rush is the president of Ambulatory Alliances ( and is a SEC Registered and FINRA Licensed Investment Banker. He specializes in acquisitions, alliances and access to capital markets for surgery and radiation oncology centers. He can be reach though the Ambulatory Alliances web site or by calling (469) 385-7792.


Note: This paper is not intended or offered as legal advice. These materials have been prepared for educational and information purposes only. This paper is not legal advice or legal opinions on any specific matters. No person should act or fail to act on any legal matter based on the contents of this paper. This paper was not written by an attorney licensed in your state. Those seeking legal advice or assistance should contact an attorney.

Copyright © 2024 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.


Featured Webinars

Featured Whitepapers

Featured Podcast