Notably, by the time of the appeal, the state had adopted the majority rule among U.S. jurisdictions, requiring trial courts to distinguish between personal and enterprise components when valuing the goodwill of professional practices in divorce. Yet, the appellate court held that the rule didn’t apply in this case, essentially because the husband’s interest lay in a large, multi-center regional practice (instead of a solo or small firm) and the trial court had “clearly and thoroughly” found that any personal goodwill, separate from enterprise goodwill, was negligible. In fact, the trial court had considered the specific quandaries surrounding the valuation of medical practice goodwill:
In the case of professional service entities, a prospective buyer must ask what exactly he or she is buying. Take the case of a doctor for example. . . . Each patient has an inalienable right to see whichever doctor he or she chooses. Add to the fact that the law greatly disfavors non-compete clauses among professionals and you are left with little reason to buy at a premium. What would prevent the selling doctor from opening a new practice down the street? Furthermore and perhaps more importantly, why would a prospective buyer pay such a premium for something he or she is capable of starting from scratch for vastly less money?
Learn how to answer these and more questions. On Tuesday, September 27th, the Online Symposium on Healthcare Valuation continues with Personal/ Professional v. Practice Goodwill in Medical Practice Valuations, featuring Mark Dietrich, Symposium curator and editor AHLA/BVR Guide to Healthcare Valuation.