Think the incentives of the buyer and seller aligned

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An elderly physician has built up his own practice into a quite valuable business. Now that he is thinking of retiring, he wants to take on a partner to learn the business and eventually buy the practice in three years. Her compensation will be a salary plus 25% of the profits if they are below the historical average and 50% for any increase above the historical average. The eventual purchase price for the practice will be 5 times the average profits over the three years. Discuss the plusses and minuses of this contract with respect to efficiency aspects and transfer of the business to the new partner. Do you think the incentives of the buyer and seller aligned?

Reference no: EM13858689

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