Why should you use a Dental Practice Broker and dental sales expert such as Samera?
We have a personable and sustainable relationship with our registered buyers, and we always strive to match the right practice with the right buyer. We listen to each buyer and discuss their selection criteria, sourcing the right practice.
What is EBITDA?
What is Due Diligence?
The due diligence is a very important exercise carried out during any dental sales and acquisitions process.
It is divided into legal and financial due diligence. It is an exercise to confirm that all information provided at the time of discussing and agreeing to offers is accurate and precise. Information such as accounts, management accounts, patients number, staff contracts, NHS contracts and any legal issues such as change of control clauses, lease and property contracts, just to name a few of the documents to be checked and diligently controlled. An expert legal and financial team will know what to look for, in a professional and time-effective way.
Why should I carry out the due diligence exercise?
After you visit the practice and check the property and surrounding areas, have a good look at the last 3 years financial statements, find out if the turnover is steadily increasing or decreasing and check if the private revenue is made up of fee per item or capitation scheme. You also want to check if the number of full-time equivalent dentists is less than the number of surgeries so that there is an opportunity to increase the workload and the revenue.
If the practice is incorporated make sure that there is not a ‘change of control clause’ in the NHS contract and if you are buying halfway through the year, check the performance of the UDAs delivery to avoid any unwanted clawback in the next financial year.
Do I need a Specialist Dental Lawyer?
Never consider the services of a solicitor or a firm with no experience with dental practice sales.
It’s that simple, but occasionally we experienced some dental principals going down the route of a solicitor who may be brilliant dealing with purchasing houses, but could slow down the process of selling your practice, potentially increasing your legal fees or asking unnecessary or more than necessary due diligence documentation to complete, ending up wasting precious time.
How do you value a dental practice?
Every practice is unique and every single dental practice has a price range of value, dictated by many factors and many variables.
It is important to look at the last 3 years set of accounts as well as the latest and up to date management account to see any upward or downward income trend, the surgery percentage of utilization and opportunity to expand are also factors that can potentially increase value and marketability.
How long does the sales process take?
The average timescale for a dental practice sales deal to complete is approximately 5.5 months.
There are many factors, such as the type of practice and the legal and financial support team selected, that can influence the timeframe and speed up or slow down the process.
What if I buy a practice with NHS contract?
Ask for the electronic copy of the GDS or PDS contract, checking all variations and any potential change of control clauses.
Regarding the sale of the dental practice with the NHS contracts, there will be 28 days’ notice between exchange and completion to add to the NHS element of the deal.
What is the sales process of a dental practice?
We like to simplify the process to 8 major steps.
Initial enquiry – the vendor sends the completed data collection form to Samera and initial discussion with our team takes place.
Valuation and practice visit – this is when we confirm the key variables and arrange a visit at the practice and our report is discussed with the vendor(s). Phase one of Samera marketing process is explained and begins straight after the meeting.
Viewings – Phase 2 of Samera marketing process consists of appointments making with potential buyers already been screened and viewings.
Offer stage – we negotiate the best financial package and best terms, then Heads of Terms are negotiated and agreed.
Due diligence – key information and documents are reviewed by legal teams.
Ongoing Support – we are there at every step of the way, supporting sellers during the financial and legal due diligence for a smooth completion.
Completion – sales and transfer of funds to the vendor’s bank account.
Does the practice need to have a partnership structure?
No, not necessary. A buyer will always consider private limited companies and sole traders. Each one is treated differently from a legal perspective and the way in which NHS England is informed is different depending on whether the vendor decides to sell the practice via assets sale or shares sales.
What issues do you come across when dealing with dental practice sales?
We have never encountered an issue that we cant resolve.
No practice is the same but we have never encountered an issue that we can’t resolve, sometimes it just takes a little longer. Any problems usually come to light at the due diligence stage when all documents are thoroughly inspected.
The most frequent time delaying issues are regarding the property or the lease negotiations.
What type of deal structures are available on the market?
We are experts in the buying and selling process of dental practices and we will help all dentists to structure a deal to suit them.
Each dentist has specific expectations, tax situations and desires.
Payments usually take the form of upfront transfer on completion for NHS-driven profits, deferred payments for performance-based criteria, earn-out for private revenue, and negotiated UDA rates for vendors working at the practice after completion, who may prefer to have a higher on-going salary rather than an upfront payment depending on their individual tax position.
Why do dental practitioners sell their practices?
Investing in alternative businesses and retirement. The most common reasons for selling are investing in alternative businesses, add to a retirement fund or to gain freedom from all of the administration and regulations of running a practice, allowing the vendor to once again focus on the things they enjoy.
How much money do I need to buy a dental practice?
You should always discuss your financial position with an expert broker and usually have at least a 10% deposit when thinking of buying a dental practice.
Most lenders will offer a maximum of £500,000 unsecured loan per dentist, depending on the practice and personal situation so if you are looking to buy a £1,500,000 practice with a partner you must have a minimum of £500,000 deposit.
If you place an offer and don’t have available funds or a finance agreement already in place you risk being unable to buy a practice and of course losing credibility in the dental world, where news travels at the speed of light.
Who is selling and their Reasons for selling?
More often than not we come across sellers wishing to take the practice to the next level with a new buyer whilst relinquishing the responsibility of running the practice as they have done this for many years. Having a seller deciding to stay at the practice to help with the transaction time is most valuable for any buyer, especially a young dentist buying a practice for a long term project.
So, have a good conversation with the seller and explain your idea, as money is not the only driver for a seller.
Why should I check the CQC inspection report?
Once your offer is accepted and you are in the process of the due diligence check the quality of the equipment, cabinetry, compressors, floor or anything that could perhaps cost you money from day one. You also need to ask the details and date of the last CQC inspection and DDA compliance to make sure that any potential requests outlined in the report have been satisfactorily covered. Your solicitor will help you with checking all equipment certificates as well as indemnity insurance for the staff.
What if the Seller is becoming an associate?
The seller may wish to stay at the practice for a number of years. Make sure you discuss and agree on an associate contract with the seller and agree on the number of UDAs to be performed, pay per UDA and working hours.
Of course, if the seller is not staying at the practice, make sure that there are some restrictive covenants preventing the seller to work near the practice that you have just bought.
A minimum of 2.5 miles in a rural area and 0.5 miles in a city should apply.
What if I wish to buy the property?
For a vendor, the options are either selling the property or have a lease in place with the buyer.
The property will be valued as a commercial property and not on a residential basis so this is a point to consider when thinking about buying it or not.
What if there is a lease on the property?
If there is a lease on the property and the lease is less than 15 years to the expiry date, it is advisable to talk to the landlord about a potential extension and engage the landlord at an early stage.
Any buyer would want at least 15 years lease or more if possible and the likelihood is that the landlord would ask for his legal costs to be covered.
Do I need to have all my certificates ready and available?
During the due diligence process, you will be asked to provide and show your certificates such as the GDC registration.
Have all those ready and will save you time and during the selling process.
Do I need to ask for an Inventory?
Yes most certainly so, it takes some time and is boring but it will create clarity with regards to the items purchased at the practice and the items that are taking away, also it will avoid any potential arguments and dispute further down the dental sales process.
Will the dental sales process trigger a new CQC inspection?
Care Quality Commission is another potential reason for a delay in practice sale, even sometimes 3 months delays if either the buyer or the seller don’t have their DBS check ready and available to submit, or the practice has not been inspected lately.
The process of selling the practice will involve deregistration of the seller and registration of the buyer to work at the practice, and this process will likely trigger a new CQC inspection unless one was carried out recently. So have everything ready and DBS not older than 6 months.
What happens to the equipment still leased?
If all or part of your equipment is leased sellers could either transferring the arrangements to the buyer or paying it off, which is usually most buyers preferred choice.
What are the legal warranties?
Most solicitors acting on behalf of their clients as buyers will advise their client to include in the Standard Purchase Agreement ( SPA ) document, a warrant from you as a seller that all information provided including any financial and contractual aspect of the practice is true and accurate.
On the other hand, the seller’s solicitors should negotiate and deal with the warranties in a way that protects the vendor and minimise their risks against potential claims in the future.