Dental Times - ASK ANNE: Potential pitfalls to avoid in a practice sale
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15 July 2020

Potential pitfalls to avoid in a practice sale

Selling a practice is a big undertaking and one that takes time and patience. There are many things to consider and it’s therefore vital to leave yourself enough time to make your practice an attractive proposition and to complete all the tasks required when going through a sale. At MediEstates, our advice is to surround yourselves with trusted advisers who have good experience in the dental sector. We can offer such advice at every stage of the sales process and we use our experience to help our customers avoid these eight potential pitfalls:

1. Check your lease agreement with your landlord

If you have a lease agreement, you will need to liaise with the landlord about having the lease taken over by the buyer. It’s important to study your lease agreement as early as possible and MediEstates can help with this to ensure you identify and resolve any problems ahead of the sale.

2. If you have an NHS contract, ensure you are hitting your targets

Any potential purchaser of your business will want to be sure that it is meeting its NHS contract. Underperformance will be a red flag to a buyer, who may be concerned about underlying inefficiencies. If you’re struggling to hit targets the recruitment team at MediCruit can help to find locum cover so you can fill gaps in your appointment book.

3. Make sure you can satisfy the Care Quality Commission (CQC)

This is potentially the most complicated part of a practice sale. Firstly, you need to make sure that your practice is correctly registered and if not, you should rectify this as quickly as possible.
When selling a practice, the practice owner usually has to apply to enter a partnership with the incoming buyer. It is crucial that the application form is completed correctly first time as it will be rejected if a mistake is discovered. Timing your application is also critical and our team can help in this respect as, whilst you don’t want to be too late, you also don’t want to be too early; if your application is accepted by the CQC but isn’t invoked for an extended period of time, they may inform you it’s no longer valid and you will have to apply again.

4. Put your business contracts in order

Before you even get a valuation of your practice, it is important to check all your contracts. Many owners may have informal verbal agreements with their staff and it’s crucial to get formal contracts in place so that the buyer can understand their obligations and an accurate valuation of the practice can be made.
If you need guidance regarding contracts, or have concerns about your running costs, you can speak to a member of our expert team.

5. Be prepared for the buyer’s bank valuation

We advise buyers to start getting indicative terms from their lender as early as possible and part of that process is the practice valuation. It’s important that the valuation is as accurate as possible and completed by experienced valuers who know the market. At MediEstates, we regularly analyse the market to make sure our valuations are in line with market trends and current bank valuations.

6. Choose the right professionals

Choosing an experienced and proactive dental solicitor is crucial to an expedient practice sale. They need to understand NHS dental contracts, know about the CQC and be easy to communicate with to keep the transaction moving forward. At MediEstates we have a panel of specialist solicitors who are experienced in dental transactions and we are happy to recommend from this list.

7. Be prepared for indemnities, warranties and redemption requests

It is standard for buyers to request that a number of indemnities and warranties are written into the contract when negotiating the terms of a sale. An example of which might be to cover the buyer in case of any claims for defective work completed by the vendor or to cover failure of any equipment. It may also include an undertaking that the seller will not work within a certain radius of the practice for a number of months. Or conversely, that the seller remains working in the practice for a period of time following the sale. Often, the biggest surprise for vendors is the request that an amount of money, typically 10 per cent of the purchase price, is held in reserve for a period of time. This happens most commonly when there is a certain amount of private income expected, but not guaranteed. It is important for vendors to be prepared for such a request.

8. Have all your paperwork ready for due diligence

And finally, it’s the responsibility of the vendor to have all their paperwork and information in relation to the business ready for inspection by the buyer’s solicitor. We always encourage vendors to put aside some dedicated time in order to complete the paperwork with as few delays as possible. The more prepared you are, the easier it will be.

There’s a lot involved in selling a practice and we consider it to be an important part of our role to use our extensive experience to help relieve the pressure and stress at every stage of the sales process.
Posted by: Anne Barker on