Buying & Selling a Dental Practice

There is much to consider if you are buying or selling a dental practice. The best advice would be to engage a lawyer experienced in this field in order to minimise risk and ensure the process is as simple as possible.

Buying a Practice When buying a dental practice the most important consideration is to "do your homework" in advance! The time and effort taken to investigate the practice in detail before you buy will pay handsome dividends. However the necessary homework comes in many forms:-

Premises

Always consider a full structural survey. Yes it’s expensive but far less expensive than inheriting a major structural problem after sale. Your lender may require a survey but it is unlikely this will be a full structural survey and the surveyor concerned is acting for the Bank not you!

If you are taking over a lease getting a Schedule of Condition prepared to document the state of the property as you move in can save endless hassle and arguments over whether a defect was caused by you or was pre-existing.

Financial Performance of the Practice

Get a good accountant to look at the performance of the Practice; ideally one experienced in dental matters. How does the performance compare with other similar practices? Is it over or under staffed? Is it on track with UDA/UOA performance and if not why not?

Due Diligence

Enquiries can be raised over each and every aspect of the Practice. However common areas of investigation include:-

Employees and self-employed persons. Who works in the practice? What are their terms and conditions and do they have written contracts in place? Are there any disputes underway in the Practice or likely? Are any persons away on sickness absence? CQC - is the Practice validly registered? Has it recently been inspected and if so with what results? Have any recommendations made by the CQC been carried out? Has the equipment within the Practice (especially X-ray equipment, pressure vessels and autoclaves) been serviced in accordance with best practice? Has the Practice complied with HTM 01-05 and other applicable regulations including those relating to amalgam separation? Patient complaint history Ownership Structure

If the investigations indicate the purchase is a viable proposition you will need to consider whether to buy as a sole principal or with another principal or via a limited company or limited liability partnership. There are pros and cons to each method. Limited companies and limited liability partnerships are often chosen to try and ensure a principal's personal assets are not at risk of being used against business liabilities. However PCTs (now abolished) were somewhat suspicious, to say the least, about dealing with corporate bodies as opposed to individual dentists. It is therefore important to consider all the angles on an informed basis before choosing the right structure for you.

Sale Documentation

A good Sale Agreement not only lists the assets being bought and sold but will deal with the following:-

UDA/UOA underperformance and clawback potential reduction in contract value; defective treatments given before sale that come to light afterwards transfer of the GDS Contract and CQC registration obtaining promises from the Seller guaranteeing that certain facts about the business either exist or do not exist as the case may be (these are referred to as warranties in legal terms) clauses regarding the transfer of employment of the members of staff; particularly to ensure the Seller has complied with all relevant information and consultation requirements with the affected staff provisions regarding the existing self-employed associates and other persons within the Practice i.e. is it envisaged you will take over such contracts or is notice to be given to such persons to terminate their contracts with or without new contracts? if required holding back a certain portion of the purchase price to wait and see that all is well after purchase imposing restrictive covenants upon the Seller. (Contrary to popular belief these are capable of being enforced if drafted carefully!!!) Final thoughts

On any basis the purchase is a significant financial and emotional affair for you. Adequate insurance is vital to protect the assets and business purchased. You should also take the opportunity to review and update your will to ensure this meets your changed circumstances and hopes but also deals with the new business purchased and how your interest in this business is to be dealt with upon your death. If you are a sole principal please consider in particular how any NHS Contract is going to be protected in the immediate period of your death.

All in all much to think about but preparing early usually saves time, expense and worry in the end!.

Selling a Practice As a general comment a Seller should get their “house in order” as much as possible when considering marketing the practice for the first time. This will often include:-

Taking early advice from an accountant experienced in dental practices. They can advise regarding the areas that will impress a buyer and, perhaps more importantly, those that will not!! With regard to the latter they will hopefully advise you how to remedy the less positive areas. Ensuring all employee and self-employed staff have written and signed contracts in place. The Buyer will want to see these to ensure they have certainty as to the current terms enjoyed by such staff; Ensure wherever possible that underperformance of UDAs or UOAs has been dealt with or is being dealt with particularly where the size of underperformance could lead to a reduction in contract value – at the very least have documentary evidence available to show the reasons for underperformance; Gather together key documents in an indexed bundle ready to hand to your advisers. This will include key contracts of supply (not least the GDS or PDS Contract), accounts and other financial documents such as Vital Signs, documents affecting the Property such as planning permissions, Building Regulation Consents and surveys and the staff contracts referred to above; Deal with any known property issues or, at least, be prepared to reduce the price apportioned to the property to cater for known defects. Once the sale process is underway be patient with the Buyer’s requests for information. Inevitably they will want to investigate a business they could be paying a large sum of money for. This should be expected as long as it does not go over the top!

The Seller should expect to give the Buyer the benefit of warranties and some indemnities in the Sale Agreement although these should be proportion to the size of the Practice and the money being paid.

If you would like to have an initial chat to discuss any of these issues we are always happy to do so without cost.

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