The Aspects Of Buying Or Selling A Dental Practice You Need To Understand

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The Aspects Of Buying Or Selling A Dental Practice You Need To Understand

Author: Lareab Mahmood

Key Contact: John Grant

Planning to buy or sell a dental practice can be a daunting experience. With so much at stake, it is important to understand the key aspects involved in a dental transaction. From the legal elements to the financial considerations, there are some key areas to consider.

Legal considerations

There are a number of legal matters to consider when buying or selling a dental practice. These include items such as such as contracts, share purchase agreements, due diligence and regulatory compliance. It is essential that the buyer is properly advised on all legal aspects of the purchase to ensure that they are fully aware of the position and legally protected. Likewise, the seller should also seek legal advice to ensure that their rights and interests are protected.

Financial considerations

The financial elements of a dental practice transaction should not be taken lightly. For a buyer, it is important to understand how much they are willing to spend on the purchase and secure the necessary financing. For sellers, it is important to ensure that the sale price meets the true market value and the terms of the sale are agreeable. It is also crucial that both parties engage specialist dental accountants in order to structure the transaction to be tax efficient, ensuring that it is more financially viable and streamlined.

For buyers, it is crucial to note that that you will incur costs for additional expenses on top of professional fees. These include property searches such as local authority search, water and drainage search, environmental searches, chancel repair searches and many more. It is important to conduct these, as they can help a potential buyer understand the current and potential risks associated with the property. The searches can reveal matters that may impact the purchase, such as legal encumbrances, environmental concerns and planning/building concerns. Knowing this information can help the buyer make an informed decision when it comes to purchasing the property. 

Transition considerations

When buying or selling a dental practice, it is important to consider the transfer of patients, staff, equipment and assets. The transition should be as easy and seamless as possible to ensure that third parties are not detrimentally impacted. The buyer should plan how they are going to manage the practice after completion of the transaction, and the seller should ensure that they have a plan in place (such as staying on at the practice for a short term), so that the transition goes as smoothly as possible.

Why is due diligence important?

Due diligence is an essential part of any transaction to ensure that all parties involved are making informed decisions and are aware of any potential risks or consequences associated with the deal. The process helps to identify any areas of concern that could cause complications, such as financial or compliance issues, or any potential threats of litigation.

It is important for buyers to be aware of any potential risks that may arise before the transaction completes. Additionally, due diligence can help protect the seller by providing a detailed overview of the financial assets and liabilities of the transaction and the parties involved. If any risks or liabilities are uncovered, the parties can take action to minimise or eliminate such risks prior to completion.

In essence, due diligence is vital to ensure all parties have a detailed understanding of the transaction they are proposing to enter into.

Some of the key areas that both the seller and buyer should cover in the due diligence exercise are as follows:

Property:

  • Is it owned or occupied?
  • Does it have the appropriate planning consent to be used as a dental practice?

Equipment

  • Inventory to be requested, including assets of dental equipment and details of maintenance. For example, dental chairs, autoclaves and x-ray machines

Insurance

  • Copies of all insurance certificates, including building, employer’s liability and public liability

Contracts

  • Copies of all commercial contracts, such as third-party supplier contracts – for example, a contract for the disposal of clinical waste.
  • Employees and associates’ contracts. These should outline details of salaries, years of service and working hours. For associates, they should also include confirmation of self-employed status.

CQC

  • Registrations details and inspection reports

Knowing what to look for and how to prepare eases the path of a sale or purchase and help avoid any unpleasant surprises. By following these key aspects, you can ensure a successful transaction.

If you have any questions about legal issues surrounding the sale or purchase of a transaction, contact our experts here.

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