The Critical Role of Your CPA in a Healthcare M&A Transaction

When you decide to sell your medical practice, your M&A advisor acts as the quarterback, managing the entire process from valuation to closing. But a successful transaction depends on a full team of specialists. As we outlined in our guide to the healthcare M&A advisory team, one of the most vital players is your Certified Public Accountant (CPA).

A CPA with transactional experience does much more than file your annual taxes. They become your financial defender, preparing your practice to withstand intense buyer scrutiny and structuring the deal to maximize your after-tax proceeds. This article explains the specific, critical functions your CPA will manage during the sale of your practice.

Beyond Your Annual Tax Return: Why You Need an M&A-Focused CPA

You may be wondering, “Can’t my regular accountant handle the sale?” While your current CPA is excellent for bookkeeping and annual tax filings, a healthcare M&A transaction is a different league. Using a generalist CPA is like asking your family doctor to perform complex surgery; they understand the anatomy but lack the specialized tools and experience for the procedure.

An M&A-focused CPA understands the unique financial language that private equity firms and strategic buyers speak. They specialize in:

• Transactional Accounting: Preparing financial statements specifically for a sale.
• EBITDA Adjustments: Knowing precisely which expenses to “add back” to accurately reflect your practice’s true profitability. You can find more details in our EBITDA normalization guide.
• Deal Structures: Analyzing the financial impact of complex terms like earnouts, rollovers, and seller financing.
• Healthcare Nuances: Accounting for revenue cycle complexities, provider compensation models, and regulatory pressures that influence value.

Without this specialized expertise, you risk presenting financials that confuse buyers, leading to a lower valuation or, worse, a broken deal.

Core CPA Functions in Your Practice Sale

A transactional CPA executes several key functions that protect and enhance your practice’s value throughout the M&A process.

Financial Due Diligence & Quality of Earnings (QoE)

Before any buyer makes a serious offer, they will conduct exhaustive financial due diligence. Think of it as a financial x-ray of your entire practice. A key part of this is the Quality of Earnings (QoE) report.

A QoE report is a deep analysis that validates your practice’s historical earnings and assesses their sustainability. It goes beyond standard financial statements to give buyers confidence in the numbers. Your M&A-focused CPA prepares your financials to pass this test. The process of CPA-led financial due diligence is a non-negotiable step for any serious buyer. For deals involving institutional investors, a formal CPA analysis of practice earnings report is invaluable for building credibility and defending your valuation.

Strategic Tax Structuring

This is where a CPA delivers a direct and significant return on investment. The way your deal is structured has massive implications for the amount of cash you take home. A CPA’s primary role here is to model different scenarios to find the most tax-efficient path forward.

The two most common structures are:

• Asset Sale: The buyer purchases the assets of your practice (e.g., equipment, patient charts, goodwill). This is often preferred by buyers for tax reasons but can result in a higher tax burden for sellers.
• Stock (or Entity) Sale: The buyer purchases the shares or membership interests of your legal entity. This structure can offer significant tax advantages to the seller.

Your CPA will model your net proceeds under each structure, factoring in current tax laws and your personal financial situation to help you and your M&A advisor negotiate the best possible terms.

Regulatory and Compliance Validation

In healthcare, financial health is directly tied to regulatory compliance. While your legal counsel ensures the deal is structured to meet legal standards, your CPA stress-tests the financial implications of your compliance history.

With increasing scrutiny at both state and federal levels, buyers will look for any sign of risk. Your CPA will review financial data related to:

• Billing and coding practices to identify potential audit risks.
• Physician compensation arrangements to ensure they align with Stark Law.
• Revenue streams to check for any red flags related to the Anti-Kickback Statute.

Identifying and resolving these issues before the buyer’s team finds them prevents eleventh-hour surprises that could derail negotiations. For a deeper look at these rules, you can review our guide to navigating Stark Law and Anti-Kickback statutes.

How Your CPA Collaborates with the M&A Advisory Team

Your CPA doesn’t work in a vacuum. They are an integral part of a coordinated team led by your M&A advisor. Clear communication between your CPA, legal counsel, and M&A advisor is essential for a smooth process.

Here’s how the roles typically interact on key tasks:

M&A Task	CPA’s Role	M&A Advisor’s Role (SovDoc)	Legal Counsel’s Role
Deal Structuring	Models after-tax outcomes of asset vs. stock sales.	Advises on market-rate valuation and deal terms.	Creates the legal entities and agreements.
Due Diligence	Prepares financial data and defends the QoE report.	Manages the data room and buyer communication flow.	Reviews contracts and regulatory documentation.
Purchase Agreement	Calculates working capital adjustments and verifies financial figures.	Negotiates the final purchase price, earnout, and key terms.	Drafts and negotiates the definitive legal document.

The CPA’s Role After the Deal Closes

The CPA’s work often continues after you’ve signed the closing documents. Post-transaction support is crucial for a clean handoff and ensuring you receive all the proceeds you’re owed. This includes:

• Finalizing Working Capital: Performing the final calculation to determine if an adjustment payment is owed to the buyer or seller.
• Earnout Tracking: Establishing a clear, auditable process for tracking the performance metrics tied to any earnout payments.
• Integration Support: Assisting with the transition of your financial systems and reporting to the new owner’s platform. For more about what happens after a sale, see our overview of financial reporting changes post-acquisition.

Choosing the Right CPA Firm for Your Transaction

When vetting a CPA for your sale, you need to ask questions that go beyond their credentials.

• How many healthcare M&A transactions have you supported in the last 24 months?
• What is your experience with practices in my specific specialty (e.g., dermatology, orthopedics, dental)?
• Can you provide a redacted example of a QoE report you have prepared for a similar practice?
• How do you collaborate with M&A advisors and lawyers during a deal?
• What is your fee structure for transactional support, and how does it differ from your standard services?

A Coordinated Approach to Maximize Your Value

An expert CPA is a non-negotiable part of your advisory team. Their ability to prepare your financials, structure the deal for tax efficiency, and validate your compliance protects your legacy and hard-earned value.

At SovDoc, we manage the entire M&A process, which includes helping you select the right specialists and coordinating their efforts to achieve your goals. We ensure your CPA, legal counsel, and our advisory team work in lockstep to drive the best possible outcome for you.

If you are preparing for a sale and need guidance on building your advisory team, contact SovDoc for a confidential consultation.