Veterinary Practice Purchase Price Consideration: JV Equity

JV equity and synthetic JV equity have become increasingly popular forms of purchase price consideration for corporate consolidators seeking to align the interests of buyer and seller during a multi-year (typically 2-4 years) practice leadership transition period.  The "JV" stands for "joint venture," and "JV equity" refers to a retained interest, either actual or synthetic (via a contractual promise), in the financial performance of the practice being sold.  These vehicles are wonderful at closely aligning financial interests in a way where the seller has more influence, relative to being provided, for example, with corporate equity (equity in the buyer), over how the value of this consideration performs in the post-closing holding period.  It offers the seller an additional "second bite of the apple" if they increase the value of the practice further in the post-closing years.  

However, it is also important to note that these instruments are illiquid (cannot be readily negotiated for cash), and therefore, a seller must rely on both the trust it places in the buyer with which it elects to partner to behave in good faith and the careful drafting of the documentation governing how such purchase price consideration is valued under different potential market and practice performance scenarios (not all of which can be forecasted at the time of negotiating the purchase price consideration terms).  These documented terms dictate how such a JV interest (or synthetic JV interest) is ultimately converted into cash for the seller.  While one always seeks to find any reasonable alternative to seeking to enforce the terms of an agreement in court, given the cost and negative publicity associated with resolving such disputes in court, sometimes a resolution in court is the only path left.

Attached are the three documents made public to date in the Delaware Chancery Court regarding the only matter in which we at dvmEvolution, in conjunction with our client (whose practice had grown by well over 30% in revenue and EBITDA in the two years since the transaction closed) ultimately decided that our only remaining choice was to bring such a dispute to court. In addition to helping our client enforce his rights, we also believe that it is important for market participants to understand clearly how a court of law interprets the language in governing documents, as such information may impact the use of these instruments in the purchases of veterinary practices going forward.   Again, while we have represented many clients where JV equity was involved, this is the only instance where we and our client have agreed that a lawsuit was the only remaining recourse for resolving such a dispute in a fair manner.

1. Verified Amended Complaint 2025-04-03

2. Plaintiffs’ Answer To Defendant 2025-04-15

3. Answer, Affirmative Defenses and Verified Counterclaims 2025-03-24