Whether you are buying or selling a dental practice, it will probably be one of the biggest financial decisions you will make in your life!
That’s why it is so important to instruct a solicitor with the right expertise. The Healthcare team at Prosperity Law will not only ensure that you and your business effectively manage all risk factors and that all of the formalities of the transfer of the business are complied with in a timely manner, we will also be here to guide you through your sale or purchase – we are always available to answer your questions, explain the steps involved, and we will always fight your corner.
We have vast experience dealing with sales and purchases on behalf of individual dentists, partnerships and corporate bodies of all sizes. Please ask us about our other services for Dentists such as 24hr retirement, procurement, dispute resolution services. We pride ourselves on our short response times and quick turnaround of documents, whilst providing you with tailored expert advice on all aspects of the transaction.
Important Things to Consider When Buying or Selling a Dental Practice
Heads of Terms
This is essentially an agreement to agree and is not always necessary in dental transactions. The sale of the practice will still be ‘subject to contract’ and so until all of the nitty-gritty is agreed in the sale agreement – there is still a chance the deal will fall through. If there is a holding deposit we would recommend appropriate documentation in place setting out the terms under which the deposit was paid and will be repaid. Sometimes Heads of Terms are agreed upon where there is an exclusivity period for the buyer to complete.
We can negotiate the Heads of Terms for you, but we are often instructed after those terms have already been agreed (in which case we will make sure that the final agreement reflects what was agreed in the heads of terms).
Due Diligence
It is vital to know exactly what you are purchasing and what the risks to you will be once the transaction completes. We will carry out a thorough review of the target business’s replies to our due diligence enquiries and report to you. We will persist with any concerns to make sure that there are no nasty surprises on day one, and where a risk cannot be avoided we will negotiate suitable legal protection for you (indemnities, warranties, etc).
For sellers, we will ensure that the buyer’s enquiries are dealt with as quickly as possible, with complete and applicable responses. The due diligence process can take many months to complete, we will carefully manage the process to ensure no time is wasted – there may be exclusivity periods running out, and the buyer’s funding will only have a limited time to draw down the loan.
We will also carry out an analysis of the practice income – does the practice have a capitation scheme? Are they achieving their targets for any NHS contracts? Obtaining details of fee per item private income.
Clinical Risk
We will ensure that buyers are protected from specific risks that come to light in the due diligence process and from the risks to be expected at a practice of the target’s nature. For sellers, we will negotiate with the buyer’s solicitor to ensure the minimum possible exposure for our client, whilst ensuring the deal does complete and minimise any delays.
NHS Contracts
For individual and partnership NHS contracts we utilize the ‘Partnership’ route to transfer the contract to the buyer. We will ensure that the correct notices are served within the correct time scale and to the correct person to ensure the transaction completes as planned!
Contracts held by a company will automatically transfer to the buyer with a sale of shares – the company is the contract holder before the sale and the company is the contract holder after the sale, it is the ownership of the company that changes hands. In these situations, we must carefully check the terms of the contract to ensure we comply with any requirement to notify the area team of a change in control of the company, or sometimes even ask for NHSE permission before the change can occur.
We will also advise you regarding UDA/UOA performance level and ensure that our buyer clients do not acquire any clawback debt along with the GDS/PDS contract.
Employees and Clinicians
Similarly, with a sale of shares, we would normally expect that all staff members and associates are correctly engaged to the company, so when the company is sold, there will be no change for the staff or associates. We will review the contractual position during the due diligence process. However, for sales of a practice by individuals or partnerships, staff and associates are contracted to the individuals who are selling the practice, and they will need to be transferred to the buyer. Employed staff will transfer automatically (unless they opt out) to the buyer under TUPE. We advise our buying and selling clients very carefully in this regard to ensure staff members are treated correctly and fairly.
The situation is a little more complicated with self-employed clinicians and we will discuss this with our clients around the time the sale agreement is drafted.
In the meantime, we understand that you may not want your staff to be aware the practice is being sold. We can be as discrete as you need us to be, and will often restrict our contact with sellers to a personal email address outside of practice opening times. Some buyers may also wish to retain the seller as an associate for a period of time. This can simply be to ensure a smoother transition of the practice or to protect the practice’s goodwill. We can discuss deferring part of the purchase price so that it is only payable if the practice maintains turnover levels, we can also advise you in relation to associate terms for the seller.
CQC
All dental providers in England must be registered with the Care Quality Commission (CQC), it is a criminal offence to provide dental services without a valid CQC registration.
In addition, further CQC applications may be necessary to transfer the NHS contract from the seller to the buyer. In order to utilize the ‘Partnership route’ to transfer the contract, we will need to provide NHS with a corresponding CQC registration. Therefore, when an individual sells to another individual dentist, we will need a CQC partnership registration in order to temporarily hold the NHS contract in a partnership (please call us to discuss this in more detail).
As the registration process with CQC can take quite some time, it is vital that CQC applications are made as early as possible. We work with several specialist CQC service providers and so we can help with any CQC issues that are causing concern either for the buyer or seller of a practice.
Property
Every practice needs premises, so pretty much every dental practice transaction will have a property element to it. Whether you will be buying (or selling) a freehold property, assigning a lease or taking a new lease from the landlord – we can deal with all of this for you.
Some sellers may own the freehold property, but exclude it from the sale. Instead, they will agree on a new lease of the premises with the buyer and keep the property as a tenanted investment property. Other sellers may hold the property in a SIPP – again, we will deal with all aspects of the property transaction and coordinate it with the transfer of the business.
We will ensure the property meets the exacting standards required of a dental practice.
We work with a wide range of specialist providers in the dental industry and we can put you in touch with expert accountants, IFAs, finance brokers, practice brokers/valuers, architects and business advisors.
If you require any advice or assistance in relation to the above please contact our Head of Healthcare, Paul Edels at paul@prosperitylaw.com or on 0151 958 0057.
