No dental practice sale is identical to another. It usually takes at least 6 months for the process to be completed, but this varies depending of the type of practice that is involved and the support structure that is in place. The process itself should always involve certain important steps.
Creating a power team to make the selling process work
Running a dental practice is one thing, selling it successfully is something completely different. It’s important to have the right professionals in place, to make sure that the process progresses smoothly. Creating a power team makes it far more likely that a sale will be secured, at the right price.
There are a variety of industry experts that it’s necessary to have on board. This needs to happen before the practice even goes on the market, as they need to understand the practice in order to provide the best possible advice and support.
Specialist Dental Sales brokers
Making sure to engage a specialist dental sales broker is important. It provides far more value that trying to sell a practice without professional assistance. Specialist dental sales brokers have access to a long list of potential buyers who they can introduce to clients. They can also professionally value practices, create sales brochures and deal with questions about, and interest in, a practice. The normal cost of using this service is around 2.5-5% of the sale price. Samera are Specialist Dental Sales Brokers.
Specialist Dental Accountants
A specialist dental accountant and tax advisor helps a seller to get the most from the sale of a practice. They know how to present accounts in a way that is attractive to buyers. They can also provide advice on aspects such as ownership of the business and how to optimise the tax position of the seller.
Seek advice early from your Specialist Dental Accountant, as before selling there maybe tax structures that could be considered before the final sale which could save tax.
Specialist Dental Solicitors
It’s never a good idea to use the services of a solicitor who has no experience of the dental practice market when selling a dental surgery. They may be an excellent solicitor when it comes to dealing with the sale of a home, but without the required specific experience they could cause serious delays with the sale, or it could collapse altogether. Do not forget, the solicitor that is chosen will be advising on vital aspects of the sale such as the contract, due diligence and property transfer, so expertise is essential. The normal cost of this service is around £5,000 – £10,000 for a sole trader or partnership and around £10,000-£20,000 for a limited company.
Marketing a dental practice
From my own personal experience, the person best placed to extol the virtues of a dental practice is the owner. They are also the best person to answer any buyer questions, honestly and thoroughly. This is why I would always recommend the seller is present when buyers view a practice.
This is an important part of marketing a dental practice, as it’s an opportunity for the seller to highlight the positives. In order to get to the point where people are viewing the practice, the specialist sales agent will carry out a detailed market appraisal of the practice and compile a brochure highlighting the aspects of the practice which potential buyers should focus on.
Non-disclosure agreements are an essential feature of a dental practice sale. They prevent potential buyers from discussing the sale with anyone except their own financial advisors. This is important as you do not want any details of the sale to leak out prior to completion. It’s not even a good idea to disclose any information to people working in the practice. There is no certainty that a deal will go through, until completion actually happens. It’s not worth creating stress and uncertainty amongst the dental practice team when there is no valid reason to do so.
Considering all offers carefully
All offers received should be considered carefully. An offer that guarantees a large sale price may seem like the best choice, but it’s not a great deal if the buyer making it is going to struggle to secure funding. There are many things to consider when looking at offers that have been made. Here are a few which are fairly common.
- Can the buyer secure funding easily and quickly?
- Is a lower offer the best choice as a quick sale is guaranteed, so associated costs will be reduced.
- Is staying on as an associate part of the offer?
- Are any of the current team part of the offer, Do they need to agree to stay in order for the deal to progress?
- Does the buyer have the substance for the sale to be successful?
It’s never as simple as just picking the highest offer and running with it.
Negotiating a deal
Once an offer comes along which looks interesting, it’s time for the dental specialist sales broker to structure the right deal for the seller, taking into account what the seller expects from the sale and what their tax situation is. There are several different arrangements for payment that can be put into place.
- Upfront payment transfer for NHS driven profits.
- Deferred payments when performance based criteria comes into play.
- Earn out agreement when a buyer is not willing to meet the sale price now but payment of an additional amount based on profits can be made at a later date. This can mean that the seller achieves more than the original sale price at the end of the day.
- Negotiated UDA rates for a seller who is going to remain working at the practice after the sale.
Once the deal has been negotiated and agreed, Heads of Terms should be put in writing so that there is no room for misunderstanding. These terms will normally be written by the buyer’s solicitor but they should be scrutinised by the seller’s expert dental solicitor. They should always be marked as “subject to contract”.
A timeline for exchange and sale can be agreed at this point, but is subject to due diligence being completed successful.
Carrying out due diligence
Once this stage of the selling process has been reached, it’s time for the buyer to carry out due diligence. It’s important that they seller is able to provide the required information and documentation, in a timely manner. This information falls within three areas, legal, clinical and financial. Information that the seller is expected to provide includes:
- Historic accounts and financial records.
- Patient records.
- CQC registration details.
- Employment contracts.
- Associate agreements.
- Supplier contracts.
- Hire purchase and lease agreements.
- Performance data.
- Complaint details.
- Inventory lists.
This list is not exhaustive. Due diligence can be a complex process and sellers always need to be prepared to provide any requested information and to answer buyer’s questions in a transparent manner.
Standard Purchase Agreement
Both parties should be protected as part of a Standard Purchase Agreement. The buyer’s solicitor will normally request a warrant from the seller to state that all contractual and financial information provided is accurate. The seller’s solicitor should negotiate to ensure that any inclusions in the warrants minimise the risk of any potential future claims.
A Standard Purchase Agreement will normally include:
- Sale of the practice and assets.
- Post completion considerations.
- Partially completed treatments.
- Employees of the practice.
- Non-Solicitation and restrictive covenants.
Exchange and completion
Once the due diligence is completed, it’s time to agree exchange and completion. If money is being paid up front, this will normally be transferred into the bank account of the seller’s solicitor on the date of completion.
It’s likely that Capital Gains Tax will be due on this money. However, a specialist dental accountant and tax expert can advise the seller about potentially qualifying for Entrepreneur’s Relief. Qualifying for this can potentially reduce Capital Gains Tax to 10%.
Selling a Dental Practice with Samera
If you’re thinking about selling your dental practice, get in touch with us today! We can make sure you get the right price for your practice.
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