Your Guide to Buying or Selling a Dental Practice

Buying or selling a dental practice is different from buying or selling any other kind of business. It is more complex due to the regulatory framework surrounding dentistry.

You need to navigate various additional hurdles common to the dental industry, including for example:

We’ve identified 15 different key points on the road to the successful completion of a dental transaction.

This process might seem daunting at first.  However, by using a law firm that has extensive experience in dental transactions, roadblocks are removed and you will have a comfortable, easier and faster journey.

Else Solicitors is recognised as having the necessary experience and expertise in completing dental practice transactions. The road to completion is not easily travelled by firms of solicitors or sole legal practitioners who are unfamiliar with its twists and turns.

If you use a solicitor who does not know the route well, you might make some cost savings initially but you are certain to veer off track, be delayed or encounter pitfalls along your way. In the long term, it is more cost-effective to use an expert firm like Else Solicitors who can act as your guide through the many twists and turns of a dental transaction journey.

In this short article we’ll take a quick look at the 4 stages on your completion journey.

Reading time: 5 minutes

Five Takeaway Points for Dental Transaction Travelers Who Want to Be in the Fast Lane:

1. Before you think about buying or selling, it is important to consider how you will transfer the most important asset of a dental practice – typically, the NHS contract. Else Solicitors are experienced in managing and serving the appropriate Notices on NHS England to effect the transfer of the NHS Contract correctly.
2. Getting the right professional advice. In addition to an experienced solicitor, you will need sound accounting and financial advice from an accountant and/or financial adviser. It is our experience that the quicker and smoother transactions are those where both buyers and sellers have gathered advice from professionals at the outset, and during the course, of their journey.
3. It is vital that you get the first steps right. Whether you are a buyer or a seller, the pre-contact stage is fundamental. Those that deal with the regulatory concerns at the outset will reap the rewards of a quick and efficient transaction.
4. A buyer needs to put aside what they think they know about the business and do proper due diligence on the Practice. A seller needs to answer these questions fully, fairly and accurately. Else Solicitors have developed an industry specific understanding of the questions that an astute buyer should be raising before purchasing a dental practice. We are also seasoned in guiding dental practitioners in their answers.
5. When drafting the Sale and Purchase Agreement (SPA), you need an experienced dental solicitor on your side. The solicitor will ensure that the interests of a seller or a buyer of a dental practice are protected. For example, an average SPA for the sale of a dental practice should include protections for a buyer against NHS Contract clawback or underperformance, and the seller will want to see that the work in progress is apportioned, to ensure work already performed is accounted for in a sale.

If you are considering buying or selling a Dental Practice then we invite you to contact Greg Bullock, our dental law specialist on 01283 526220 or at greg.bullock@elselaw.co.uk. He can offer you a free, one-hour consultation to assess your practice and ensure that you are compliant with all of the legal aspects of running your practice.

The Key Stages in Buying or Selling a Dental Practice

There are four key stages in buying or selling a Dental Practice.
1. Pre-contract
2. Due-diligence
3. Contract negotiation
4. Exchange and completion

1. Pre-Contract

This starts with the buyer and the seller being brought together, usually by a Business Agent. The seller will present the buyer with a few key facts about the dental practice such as:

  • Turnover
  • Profitability
  • General information (e.g. number of surgeries, presence of an NHS contract and/or private capitation scheme, number of employees etc.)

The buyer will then make an offer having obtained initial approval from a funder (if needed). There may then be some negotiation which will, hopefully, result in the seller provisionally accepting the offer.

At this point, it is highly recommended that both buyers and sellers engage legal practitioners who are experienced with dental transactions so that the journey to completion is as quick and painless as possible.

As part of this stage, it is key to make a start on the CQC registration application. A new registration application will take the CQC 10-12 weeks to process, and will most likely include an interview.

Else Solicitors are familiar with the application process and can offer advice, guidance and drafting support for the registration application.

2. Due Diligence

As the Pre-Contract stage draws to a close, parties may consider the signing of Head of Terms – a simple document setting out the intention of the parties in relation to the transaction. This is usually drafted by a Business Agent but a solicitor can be used to ensure that fundamental conditions are set out and elements of the document are legally enforceable.

The buyer’s solicitor usually sends a due diligence questionnaire to the seller’s solicitor. This asks important questions, which the seller is obliged to answer and provide relevant supporting documentary evidence for such as:

  • the last 3 years of Practice accounts;
  • the number of patients;
  • details of any private capitation scheme or NHS Contracts;
  • details of any disputes, claims or litigation affecting the Practice, with any patient, employee and/or supplier.

The buyer and their solicitor will review these responses and the supporting documentation. It is normal for the buyer’s solicitor to make additional enquiries to clarify responses or seek further detail from the seller. The buyer will also make separate standard enquiries about the premises.

This stage is all about information gathering and the seller determining whether or not they wish to purchase the Practice.

3. Contract Negotiation

Once the buyer is reasonably happy with the Due Diligence information, they typically move to the drafting of the key contractual document – the Sale and Purchase Agreement (SPA).
This is where the warranties of the seller (statements of facts about the Practice) are laid out. The buyer’s solicitors will be looking to ensure that these are as wide and all-encompassing as possible, while the seller’s solicitor will aim to limit them.

The SPA also includes specific provisions only found in dental transactions such as:

  • The apportioning of any dental work in progress; and
  • NHS Contract clawback and/or underperformance.

An SPA will also include restrictions on a seller to refrain from competing with, and poaching staff and patients from the Practice, post-completion. It will also include provisions dealing with the transfer of the assets of the Practice, namely any private capitation schemes (e.g. Denplan, Practice Plan and/or DPAS), the equipment and the Practice premises.

The SPA will also include partnership documentation to create a partnership between the seller and the buyer for the performance of the NHS Contract, and the retirement of the seller from the partnership.

The seller and the seller’s solicitor will take the warranties found in the SPA and create a Disclosure Letter. The Disclosure Letter provides evidence (known as disclosures) to either support or undermine the warranties. A seller will want to limit their responsibility for a claim against the warranties, by making full, fair and accurate disclosures – a buyer will want to ensure that the disclosures do not adversely affect their decision to purchase the Practice.

4. Exchange and Completion

Once the parties have agreed the SPA and Disclosure Letter and the parties have received a letter from the CQC confirming the registration application has been approved, the parties can move to exchange and completion.

Exchange – is the swapping of agreed, signed and dated SPAs. This swapping of contracts creates legally binding rights and obligations on the parties.

Submission of NHS Notices – a request for a variation to the NHS Contract, normally to change from the sole name of the seller into the joint names of the seller and the buyer.

Informing and Consulting with Employees – the parties must deal with their joint obligations under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) to inform and consult with employees. This involves the seller and the buyer meeting with the employees, to consult with them about any changes to the employment contracts, required by the buyer.

Completion – this is when payment for the Practice is made. Then, normally 1 to 2 months after completion, the seller’s solicitor will submit an NHS notice to retire the seller from the partnership. This will trigger the release of a new NHS Contract in the sole name of the buyer.

As you can see there are a multitude of things to consider when buying or selling a Practice. It is always best to seek the support of an experienced solicitor on this journey.

Why Else?

Else Solicitors have extensive experience in buying and selling dental practices.

As well as dental transactions, the dental team at Else Solicitors is experienced in:

  • drafting and advising on partnership agreements;
  • expense sharing agreements;
  • associate agreements;
  • employment contracts for dental staff;
  • CQC registration applications;
  • NHS Contract variations;
  • 24-hour NHS retirement;
  • other matters specific to the dental industry.

You will receive sound, practical advice and we will remove the stress from dental transactions and the management of your dental practice.

We invite you to contact Greg Bullock, our dental law specialist on 01283 526220 or at greg.bullock@elselaw.co.uk. He can offer you a free, no obligation consultation and quotation in respect of dental transactions and any other legal needs of a dental practice.

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