Selling Your Dental Practice? – 8 Tips for Avoiding Common Pitfalls

Are you within 5 years of selling your dental practice?

Dentists face many challenges when it comes to planning to sell their practice(s).

Alison Oliver from law firm Ward Hadaway shares with us her 8 Tips for Avoiding Common Pitfalls.

Selling your dental practice is a big deal. At Ward Hadaway we have helped numerous practice owners sell their practices.

This article summarises some of the key pitfalls that can be encountered when selling your practice and what you can do to avoid or reduce them.

Tip 1: Plan ahead

Many sellers have unrealistic expectations about how quickly a sale can be completed. Even when you have found a buyer, a dental practice sale can take a long time to complete – sometimes many months.

This is because the process has to be dovetailed with CQC requirements and, where there is an NHS contract, with NHS regulatory requirements.

There is also a lot more work involved on the part of the seller and the buyer than they may appreciate in advance of the process.

You cannot expect to market and complete the sale of your practice at short notice. You should set a target date for selling the practice at least a year or two in advance and work gradually but systematically
towards that target date.

Tip 2: Appoint specialist advisors early in the process

Dental practices operate within a very particular legal and regulatory framework and it is important that your advisors are specialists who understand this framework.

If they don’t, it can cause delays and be more costly in the long run.

You should obtain specialist financial planning advice to help you decide when is the best time for you to sell your practice and whether you need or want to continue working as a dentist after the sale.

You should also obtain specialist tax and accounting advice.

You will also need to appoint a specialist solicitor to assist with the sale.

Appoint your advisors early on and make them aware of your target timescales.

Tip 3: Prepare for the buyer’s due diligence exercise

Once you have found a buyer and accepted their offer, the buyer will carry out due diligence – a process of obtaining detailed information about the practice and how it is run.

Sellers are often surprised and even overwhelmed by the amount of information that is requested and can struggle to compile everything that is needed, particularly if the staff are unaware of the proposed sale and the owner is having to come into the office under cover of darkness to collate documents after a full day in the surgery.

This can cause delays in the transaction.

You can prepare for this by starting to compile important documents in advance: make copies and prepare an indexed file of key documents.

Your solicitor and accountant will be able to advise you on the documentation that the buyer is likely to require.

Tip 4: Make sure your house is in order

In the run-up to the sale, you should check that all your processes and documentation are in order.

For example, do all your employees and associates have written contracts?

Are these signed and up to date?

Are your practice policies up to date?

Do you have all the registrations and licences that you should have?

Is all the practice equipment in good working order, and has it been inspected and certified as safe where this is required?

Do you carry out regular health and safety audits and act on the results of these?

The transaction will progress much more smoothly if the practice is well run and the documentation that you provide to the buyer reflects this.

Tip 5: Consider premises requirements

You should consider how the practice premises fit into the overall transaction as the deal may be de-railed if you are unable to transfer your property interest to the buyer.

For example, if the surgery is leased, do you have a copy of the lease and the landlord’s contact details?

You should ask your solicitor to check the requirements for assigning the lease to the buyer.

Your solicitor will need to demonstrate that you have good title to the premises and you should discuss with them whether you have all the necessary documents or whether documents need to be requested from other parties.

If the premises are subject to a mortgage, you should check your lender’s requirements for discharging the mortgage at completion.

Tip 6: Confidentiality

Until contracts for the sale are exchanged with your buyer, either side could walk away from the deal.

You will be providing the buyer with confidential and commercially sensitive information about your practice, and you may not want your staff and patients to know that you are thinking of selling until you are certain the deal will go ahead.

You should consider asking the buyer to sign a confidentiality agreement preventing them from disclosing confidential information about the practice or details of the deal.

Tip 7: Business structure

You may be running your practice as an individual sole trader, in a partnership or expenses sharing arrangement with another dentist or dentists, or through a limited company.

It’s important that your registrations, licences and other practice documentation reflect your practice structure.

For example, if you run the practice through a limited company, is your NHS contract and CQC registration in the name of the company?

If not, this could cause difficulties and delays when you come to sell.

Speak to your solicitor to ensure that any problems are rectified in advance of the sale.

Tip 8: Don’t take your foot of the pedal

The value of your practice is dependent on a number of factors, such as the quality of the service that you provide to your patients, as well as the condition of your premises and equipment and the strength of your workforce.

Some sellers can be tempted to start to wind down their efforts once they have accepted an offer from a prospective buyer.

However, your buyer wants to take over a practice that is functioning at the same level as when they made their offer, and you need to be alert to the risk that the deal could fall through.

You therefore need to continue to devote sufficient time, attention and resources to managing your practice right up until completion.

This means continuing to address any staffing issues, repairing and replacing equipment if required and continuing to book in patient appointments for after the sale.

In the latter stages of the transaction, and particularly after contracts have been exchanged but before completion takes place, this may well involve consulting with the buyer to ensure that any important decisions that you make are consistent with his/her plans for the practice.

Ward Hadaway is a top 100 full service law firm with a national reputation for its healthcare work. Alison Oliver is an Associate Solicitor with more than 10 years’ experience advising GPs, dentists and other healthcare professionals on legal issues affecting their practices.

She handles numerous dental practice sales and acquisitions each year and is praised by clients for her efficiency, excellent service and proactive approach to anticipating and preventing pitfalls in dental transactions.

You can contact Alison here.

This article is intended to provide general information only and should not be relied upon as legal advice.

Copyright Ward Hadaway Law Firm 2018

Take Action

Alison’s 8 tips are an excellent resource if you’re planning to sell your practice in the near future. Even if you feel that you’re on top of all the issues covered, it may be an idea to keep her article as a reference point.