Selling your medical practice is one of the most significant financial events of your life. The M&A advisor you hire to guide you through this process must have one priority: getting you the best possible outcome. But what happens when their interests don’t perfectly align with yours? This is a conflict of interest, and in healthcare M&A, it’s a risk you can’t afford to ignore.
This guide will help you understand the most common conflicts of interest, show you how to spot the warning signs, and provide an action plan to ensure your advisory team is fully aligned with your success. Your goal is to build a team you can trust, and that starts with understanding the landscape. For a complete overview of all the roles involved, you can always refer to our main Healthcare M&A Advisory Team Guide.
What is a Conflict of Interest in Healthcare M&A?
A conflict of interest happens when your advisor has competing duties or personal interests that could prevent them from acting solely in your best interest. Think of it like a physician prescribing a specific drug not because it’s the best option for the patient, but because they have a financial stake in the pharmaceutical company that makes it.
In M&A, this might mean an advisor pushes you toward a particular buyer or a specific deal structure because it benefits them more than it benefits you.
In the complex world of healthcare, the stakes are even higher. With heightened regulatory scrutiny and the unique nature of clinical operations, a conflicted advisor can lead to more than just a lower valuation. As healthcare M&A trends for 2025 show, a significant number of deals fall apart due to integration and compliance risks—issues a conflicted advisor might be incentivized to ignore.
The Four Most Dangerous Conflicts for Practice Owners
Conflicts aren’t always obvious. They often hide in the fine print of contracts or in longstanding relationships that you may not know about. Here are the four you are most likely to encounter.
1. Dual Representation: The Obvious Conflict
This is the most straightforward conflict. It occurs when an M&A advisor represents both you (the seller) and a potential buyer in the same transaction. While some might argue this creates efficiency, it almost always puts the seller at a disadvantage.
An advisor in this position is motivated to simply get the deal done to collect fees from both parties. They are less likely to negotiate aggressively on your behalf for valuation, earnout terms, or key provisions in the definitive agreement. They become a neutral facilitator, not your dedicated advocate.
2. Misaligned Fee Structures: The Hidden Incentive
How your advisor gets paid directly influences their behavior. While a success fee may seem like a good way to align interests, the structure matters immensely. An advisor who is only paid a percentage of the final deal value has a strong inventive to close any deal, not necessarily the best deal.
They might pressure you to accept a lower offer that comes in early rather than putting in the extra months of work required to find a better one. The small increase in their fee may not be worth the additional effort to them, but it could mean hundreds of thousands of dollars to you.
| Fee Structure | How it Works | Potential Conflict |
|---|---|---|
| Pure Success Fee | Advisor is paid a percentage only if a deal closes. | High incentive to close any deal quickly, even if terms are subpar. May ignore post-close risks. |
| Retainer + Success Fee | Monthly retainer plus a percentage at close. | Better alignment, as the advisor is paid for their work. The success fee still incentivizes a close. |
| Milestone-Based Fee | Payments are tied to achieving specific goals (e.g., generating qualified LOIs). | Strongest alignment. Rewards progress toward your strategic objectives, not just deal completion. |
A well-structured fee agreement is one of the most powerful tools you have. You can learn more in our detailed guide to M&A Advisor Fee Structures.
3. Undisclosed Buyer Relationships: The “Insider” Deal
The healthcare M&A market is active, and many advisors have long-standing relationships with private equity firms and large strategic buyers. These relationships can be a source of great value, providing access to qualified buyers.
The conflict arises when this relationship is undisclosed or when it becomes a preference. An advisor may have an informal arrangement to steer deals toward a specific PE-backed MSO. They might present this buyer as your best or only option, cutting short a broader marketing process that could have yielded superior offers. This limits competition and puts a cap on your practice’s potential valuation.
4. Downplaying Risk: The “Smooth-Talking” Conflict
Getting a deal from a signed Letter of Intent (LOI) to the closing table is hard work. It involves intense due diligence around financials, operations, and regulatory compliance. A major red flag is an advisor who dismisses your concerns about these areas.
They might gloss over the complexities of navigating Stark Law and Anti-Kickback statutes or the very real costs and challenges of technology and EMR integration. Why? Because properly addressing these issues can be difficult and might scare off a buyer. A conflicted advisor may choose to push these problems down the road to secure their fee, leaving you to deal with the consequences after the deal is closed.
How to Protect Your Practice: An Action Plan
You can and should take proactive steps to ensure your advisor’s interests are aligned with yours. It isn’t about being cynical; it’s about being a prudent business owner.
Step 1: Ask the Right Questions Before You Sign
Your due diligence on an advisor is just as important as a buyer’s due diligence on you. This is a critical part of how to select an M&A advisor. In your initial conversations, ask direct questions and demand clear answers.
- “Will you be representing any buyers you bring to us?”
- “Can you provide a list of all financial relationships your firm has with potential buyers in my specialty?”
- “How do you manage situations where two of your clients might be competing for the same acquisition opportunity?”
For a full checklist, see our guide on questions to ask M&A advisors. An advisor who is hesitant or vague in their answers is waving a red flag.
Step 2: Structure the Engagement for Transparency
Your engagement letter is your primary tool for managing conflicts. Work with your legal counsel to ensure it contains language that protects you.
- Demand Full Disclosure: The letter should require the advisor to disclose any and all potential conflicts in writing, both at the start of the engagement and on an ongoing basis.
- Prohibit Dual Representation: Explicitly state that the advisor may not represent any party other than you in the transaction.
- Define the Scope: A clear scope of work helps prevent your advisor from being paid for work they didn’t do. This is a key part of the M&A advisor engagement process.
Step 3: Use Independent Verification
Your M&A advisor is the quarterback of your deal, but they shouldn’t be the only player on your side of the field. Engage independent experts to act as a check and balance. The most important of these is your attorney. Ensure you have experienced legal counsel whose primary experience is in healthcare M&A. Their job is to protect your legal and financial interests, and they can spot risks your advisor might overlook. The role of legal counsel in M&A is to be your shield against regulatory and contractual risk.
SovDoc’s Commitment: Your Unconflicted Advocate
At SovDoc, we built our firm to eliminate these conflicts from the start. We exclusively represent physician-owners in sell-side M&A transactions. We never represent buyers. This ensures our incentives are 100% aligned with yours—to achieve the highest possible valuation and the best possible terms for you and your practice.
Our process is designed for transparency. We act as the coordinator for your entire healthcare M&A advisory team, working alongside your attorney and accountant to ensure every decision is made with your best interests at heart.
If you are considering a sale and want to be certain your advisory process is built on a foundation of trust and advocate-driven advice, contact us for a confidential discussion.
Frequently Asked Questions
What is a conflict of interest in healthcare M&A advisory?
A conflict of interest occurs when an M&A advisor’s duty to the client (the seller) is compromised by competing interests or relationships. For example, an advisor might push a buyer or deal structure that benefits themselves more than the seller, similar to a physician prescribing a drug because of a financial stake rather than patient benefit. In healthcare M&A, this risk is heightened due to regulatory scrutiny and complex clinical operations.
What are the most common types of conflicts of interest in selling a medical practice?
The four most dangerous conflicts include:
1. Dual Representation – when the advisor represents both seller and buyer, reducing advocacy for the seller.
2. Misaligned Fee Structures – such as pure success fees that incentivize closing any deal quickly rather than the best deal.
3. Undisclosed Buyer Relationships – advisors steering deals towards favored buyers without full disclosure.
4. Downplaying Risk – advisors minimizing regulatory or integration issues to close the deal fast.
How can fee structures create conflicts of interest in M&A advisory?
Fee structures heavily influence advisor behavior. A pure success fee (paid only if a deal closes) motivates advisors to close any deal quickly, possibly ignoring better offers or risks. Retainer plus success fee models provide better alignment, while milestone-based fees reward progress towards your strategic goals. Structuring fees properly is key to ensuring your advisor’s incentives match your best interests.
What questions should a physician-owner ask an M&A advisor to detect conflicts of interest?
Key questions include:
– Will you be representing any buyers you bring to us?
– Can you disclose all financial relationships your firm has with potential buyers?
– How do you manage conflicts when multiple clients compete for the same buyer?
Hesitation or vagueness in answers can signal a red flag. For a full checklist, see SovDoc’s guide on questions to ask M&A advisors.
How can a physician protect their practice from conflicted M&A advisors?
Protection involves a three-step action plan:
1. Ask pointed questions during advisor vetting.
2. Structure your engagement letter to require full disclosure, prohibit dual representation, and define clear scope.
3. Use independent verification, especially experienced legal counsel, to check risks your advisor might overlook. SovDoc’s sell-side-only representation model is designed to align fully with your interests and avoid these conflicts.
