In this episode of The Business of Practice podcast, Charlotte Lacroix, DVM, JD, owner of Veterinary Business Advisors Inc., discussed minority equity share offers for equine practice associates. These offers are becoming increasingly common as signing or retention bonuses, often from large corporate practices. By providing veterinarians with an equity share, these corporate entities hope to spur higher performance because “they have skin in the game,” Lacroix said.
The Veterinary Information Network (VIN) recently published an article on this topic, quoting Lacroix. She also gave a talk on minority equities at VMX in January. Because such offers are complex, she became concerned about associates’ ability to fully understand and evaluate these opportunities.
The offers often include 50-80 pages of legal language, she said, and it can be difficult and expensive for associates to find an attorney who specializes in such equity exchanges. She noted that associates have a very limited ability to change the offered terms. She recommended asking the following questions before accepting an offer:
- Describe the equity. Are there different classes of equity with different rights?
- When does the equity vest? Gradually or after a certain number of years?
- Do the equity documents have a noncompete more onerous than the one I am signing or have signed as an employee?
- Can I require my employer to buy back my equity at any time or only at a predetermined time?
- How will my equity be valued?
- How will I be paid? In cash?
- If there is a “triggering event,” will I be 100% cashed out or will I be required to roll my current equity over into the new company’s equity?
- Can the operating agreement to which my equity is tied be changed at any time without my consent?
- If I am terminated from employment for any reason (including death, disability, or for “no cause” by my employer), will the value of my equity be discounted?
- What if I want to get my equity out or forfeit it? Will the noncompete still apply?
“Don’t be afraid to ask specific questions and expect specific answers,” Lacroix said. “You can say I would like a term sheet from your legal department that answers these questions.”
About Dr. Charlotte Lacroix
Charlotte Lacroix, DVM, JD, earned her Doctor of Veterinary Medicine from UC Davis in 1988, after which she worked as an equine practitioner until her love of advocacy led her to pursue a law degree at the University of Pennsylvania in 1997. Her professional career has been dedicated to helping veterinarians and other members of the industry navigate the quagmire of risks and challenges within the veterinary profession.
Lacroix owns Veterinary Business Advisors Inc., a national consulting firm for veterinary business and legal issues. She has more than 20 years of experience assisting veterinarians, and she lectures extensively on business and legal issues. She also facilitates continuing education seminars nationwide. Lacroix volunteers for organizations including AVMA, AAHA, AAEP, NJVMA, and PVMA. She is currently a board member of the Veterinary Innovation Council and Veterinary Virtual Care Association.
You can find Lacroix at veterinarybusinessadvisors.com.
Related Reading
- Business Briefs: Should You Buy Minority Shares in a Large Veterinary Practice?
- The Corporatization of Equine Practice
- Business Briefs: Are Practice Owners More Satisfied Than Associates?
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